Why We Need to Form a Third Political Party
to Challenge the Democrats and Republicans
In view of the economic instability and relentless government growth that we are now experiencing in America, it should be alarmingly clear that we as a people have lost our compass of freedom and sanity.
For the past 40 years, political conservatives have put their trust in the Republican Party to bring about a reduction of government spending in Washington and a restoration of limited government that the Founding Fathers established.
Every election year, Republicans speak the language of freedom on the campaign trail, but after taking office, they do just what the liberals do -- they bring us bigger and bigger government.
Now we have all been taught in school that one of the great strengths of the American political system lies in the fact that we have a "two-party political process." We at AFR believe this is akin to teaching that babies come from storks. It's a fairy tale we spin out to avoid messy details of reality that we prefer not to face.
The reality is that America is now a one-party state. The Democratic and Republican parties have become nothing but two divisions of the same party -- the Demopublican Party. No matter who wins, we always get more taxes, more inflation, more bureaucracies, more wars, and less freedom.
The Demopublicans now tax over 50% of our earnings every year. They steal hundreds of billions from our savings through currency debasement. They have brought us a national debt of over $9 trillion dollars. They have saddled us with $45 trillion dollars in unfunded liabilities to be loaded upon the backs of our children. They are consuming the substance of our lives like a swarm of locusts consumes a golden wheat field.
We at AFR believe there is only one hope for meaningful reform. Americans must challenge this egregious irresponsibility with a third political party. But it must be a REAL THIRD PARTY that will actually pose a threat to the Demopublicans' monopolistic rule.
This is the most crucial issue of our time, and we must face up to it. We have a runaway Federal Government in Washington, and we must figure out how to stop its tyrannical growth. The way to do this is to grasp the cause and effect process involved. One of the cardinal laws of all intellectual and scientific progress is that we must always go to the root causes of our problems if we want to solve those problems.
If we are to find the root causes of why we suffer a tyrannical government in Washington, we must go all the way back to 1913. For it was in that fateful year that the Federal Reserve System and the progressive income tax were enacted into law.
These two institutions ushered in the two major evils of modern day politics, which are: fiat money, and the progressive income tax. It is these two evils that have destroyed the idea of "limited government" that the Founding Fathers gave to us.
Franklin Roosevelt in 1933 and Richard Nixon in 1971 were the architects of the first evil. When they removed gold backing from the dollar, they gave the Federal Reserve the power to establish a fiat paper money system. This gave the Federal Reserve the ability to then inflate the currency at will, which gave Washington the capacity to secretly rob Americans of their wealth through currency depreciation.
This then was the first evil that came out of 1913 -- perpetual debasement of the currency. The second evil of 1913, the progressive income tax, was equally as dangerous. It gave to our government the ability to arbitrarily seize the earnings of productive Americans to buy voter support from vast hordes of special interest groups.
Herein lies the death knell of the American republic. With the ability to arbitrarily print paper money and confiscate our incomes, the Federal Government has been able to grow exponentially over the past century.
If we are to stop this travesty of tyrannization over our lives, we must go to the root causes of such tyranny. We must challenge these two policies of "fiat money" and "progressive taxation," for they are what give the Federal Government its power to grow unabated.
Educating the populace, however, about the Fed and the income tax through conventional means is well nigh impossible today because the ideology of big government dominates our schools and our media. So we need to circumvent this statist bias and go directly to the people -- to the one-hundred million voters that determine what kind of government we are to have.
We at AFR submit that the way to quickly reach 100 million voters is through the formation of a third political party. [Let's call it the FREE AMERICAN PARTY.] But it cannot be just another conventional third party that we see plodding along today getting 1% of the vote every election year. It must be a REAL third party that can actually stop the growth of the Federal Government.
So keep in mind that our two goals are to explain to 100 million American voters why we must check the dangerous power of the Federal Reserve and why we must end the injustice of the progressive income tax.
In other words, we must overcome the statist bias of our schools and our media in a way that will sensationalize our message and galvanize tens of millions of Americans. We must use a third political party as a promotional vehicle for our cause.
In order to do this, we must break the monopoly that Demopublicans have over the modern political scene. This will require the adoption of two crucial, fundamental political reforms. It is what we at AFR call the "Two Pillars Strategy."
Most of us agree that ending the dictatorial power of the Federal Reserve and abolishing the progressive income tax are goals that cannot be achieved overnight. But there are two essential first steps that can be promoted through a political campaign, that would allow us as a people to get control over the alarming growth of the Federal Government in Washington.
These two steps are the enactment of an "honest money" system and an "equal rate tax" system. These are the two pillars upon which we can build a powerful third political party to stop the growth of government in Washington cold. Let's examine these two pillars and see how.
Pillar # 1 -- An Honest Monetary System.
What exactly do we mean by an "honest" money system? We mean a system that does not steal our savings every year through currency debasement.
It is accepted by all reputable economists today that central bank expansion of the money supply at a faster rate than the economy's production of goods and services is growing results in price inflation. In other words, if goods and services are growing at 3% a year and the government is expanding the money supply at 8% per year, then we will have a 5% inflation rate for that year. This is currency debasement, or simply stealing from the people.
For example, if the government inflates the money supply by 5% during the year, it means that our money will be worth 5% less at year's end. A diligent saver with $100,000 in the bank now has only $95,000 worth of buying power. The Federal Government, however, has $5,000 extra in buying power because it printed the new money out of thin air.
Multiply this times millions of savers in America and we're talking about hundreds of billions of dollars that are being stolen from the people every year by the Federal Government.
This is obviously not honest. An "honest monetary system" is one that expands the money supply no faster than the growth of goods and services. This way there is no currency debasement and no loss of buying power for our savings.
In light of this, we need to ask ourselves what type of money can a society possibly have when its government bankers can simply print that money at will? What level of stability will there be for the prices of that society and for the savings of its people?
History clearly teaches us that no country can remain stable and prosperous if it allows its money supply to be controlled by government bureaucrats and bankers. The temptation is simply too great for such bureaucrats to promote excessive expansion of the money supply in order to create an illusion of prosperity so that the electorate will continue to reward them with more power.
Ever since 1936, the Federal Reserve's monetary policy under both Republican and Democratic administrations has always been to pump more credit (in other words, more debt) into the system -- because according to John Maynard Keynes and his academic progeny, this is the only way to maintain a prosperous economy.
In other words, the Federal Reserve must be allowed to expand credit to whatever level it thinks desirable, or we won't be able to maintain sufficient economic growth. But this is totally false. America's economic growth during the 19th century was spectacular, and there was no Federal Reserve pumping paper money and credit into the system at all.
For example as we see in the above chart, the Consumer Price Index (CPI) actually decreased by 40% between the years 1800 and 1913. But from 1913 to the present day, the CPI has increased by 1,850%.
This is because ever since 1913 the money supply has been created by Federal Reserve bureaucrats at a faster rate than the production of goods and services. This is why we have price inflation, and this is how our money is being stolen from us by the government. False Keynesian economics dominates our politicians in both the Democratic and Republican parties.
The Keynesian monetary philosophy of constantly increasing paper money and credit is what led to the runaway inflation of the 1970s and to the wild bubble economy of the past 15 years. What our economy is now experiencing is the result of all that past credit inflation. We now have to go through a lengthy recession and purge this excess debt brought about by our government in Washington. This is the only way we can restore economic health.
But there is a giant problem. Unless this purging of debt is accompanied by genuine monetary reform, we as a country are doomed to merely repeating the Keynesian fallacies of credit inflation. We are doomed to an ever-increasing dictatorial government that steals our savings and corrupts our society. The only way to eliminate such corruption is to establish a monetary standard other than the whims of federal bankers and bureaucrats. Throughout history that standard has always been gold.
Restoration of a gold standard, however, will require revolutionary thinking in the field of monetary theory and will require many decades to educate the public as to its necessity.
So the question we have to ask is this: Could a 51% majority of voters be motivated to accept gold as money and pass its implementation into law? No they couldn't; not at this time in history. But our reform pillar of "honest money" doesn't need to establish gold money right away in order to be effective. It can be structured to temporarily bypass gold so as to make the reform acceptable to the people.
For example, as a preliminary step to actually establishing a gold-backed dollar, the Nobel Prize winner Milton Friedman's 4% auto-expansion plan should be enacted. His plan is to computerize the increase of the money supply at 4% annually -- in other words to make monetary expansion automatic and totally remove it from the arbitrary hands of Federal Reserve bureaucrats. This would allow us to check the irresponsible power of the Fed until the American people can be educated as to the necessity of restoring a sound gold-backed money (which may take many decades).
Thus the first pillar of the Free American Party is to enact an "honest money system" for America that prohibits Federal Reserve bureaucrats from expanding the money supply at will. Milton Friedman's 4% auto-expansion plan is an excellent first step to ultimately getting gold back into the dollar.
This will end the Federal Government's ability to steal 3%-8% of our savings every year. Therefore, it will increase everyone's standard of living by an average of 5% annually.
Pillar #2 -- An Equal Rate Tax
The fundamental principle of the Declaration of Independence, which undergirds our political-legal systems in this country, is that all citizens are to possess equality under the law. Our whole concept of rights is based upon them being equal for all citizens of the Republic.
In 1913, however, there took place a most shameful default on this concept of "equal rights under the law" when our Supreme Court judges allowed a progressive income tax to be enacted by Congress, despite the fact that a progressive rate tax is clearly unconstitutional.
The reason why a progressive rate tax is unconstitutional in America is because different classes of society are assessed different rates under such a system. This denies American citizens an equal right to the disposal of their property (in other words, their income). And thus it denies them equal protection under the laws of the land. It is contrary to everything for which America stands.
As the renowned Scottish economist J.R. McCulloch stated over 150 years ago, "The moment you abandon the cardinal principle of extracting from all individuals the same proportion of their income or of their property, you are at sea without a rudder or compass, and there is no amount of injustice or folly you may not commit."
Under our present system, the blindfolded Goddess of Justice has been allowed to peek. "Tell me first who you are and what you earn," she says, "then I will tell you how the tax laws apply to you." This is privilege and arbitrary law, the harbingers of every tyranny throughout history.
This then is the moral and philosophical case for abolishing the progressive income tax. It is simply unjust, unconstitutional, illegal, and dictatorial. But in addition to the philosophical case, there is also a very powerful practical reason why ending this tax is so important.
This is because if we end progressive tax rates, there would no longer be any incentive for voters to try and gain their life's status by relentlessly increasing government spending, in other words, by redistributing wealth from the pockets of their neighbors.
Most Americans do not understand this, but the major cause of explosive government spending is our use of progressive tax rates to redistribute wealth. This is because the progressive income tax permits large constituencies of voters to pay zero taxes and equally large constituencies to pay next to zero taxes. Thus, a progressive income tax spawns a "something for nothing" voter mindset that dominates all elections.
For example, the upper 50% of income earners in America pay 96½% of the taxes, while the lower 50% of income earners pay only 3½% of the taxes. These are IRS statistics. The bottom quadrant pays zero taxes with the next quadrant paying 3½% of the taxes, and the top two quadrants paying 96½% of all taxes.
So we have a system where the bottom 50% of American voters get their government services for free or next to free. Well, what happens to desire for services when we get them for free? To use economic terminology, we have created "infinite demand" for those services, have we not? If people get something for free and they like that something, then they want all they can get of it. That is just human nature.
So this is the root of the problem. Our tax system has created "infinite demand" for government growth -- because it exempts 50% of the American people from meaningful payment of taxes.
Overcoming this "infinite demand" for government spending will be impossible until we genuinely reform the tax system and eliminate its something for nothing aspect. This means ending all deductions, all exemptions, all privileges. Period. This will require the adoption of a simple equal rate income tax (in other words, a genuine flat tax) that does not convey favors or exemptions to anybody.
Since voters would then have to pay for all government subsidies and pork barrel programs proportionately out of their own pockets, they would lose their overwhelming desire to have such subsidies and programs. They would begin to favor politicians who advocate reduction of government instead of its constant expansion -- because this is the only way they could get their own taxes reduced and more freedom into their lives.
But as long as voters pay zero taxes or next to zero taxes, they will continue to favor politicians who offer more programs and more pork every November at election time. An "equal rate tax" is the only way to end the automatic expansion of government.
In other words, no one is to get special privileges. All citizens must contribute to the system rather than leeching from the system. For example, under a 15% flat tax, if a man earns $100,000 in a year, he would pay $15,000 to fund the government. If he earns $10,000 annually, he would pay $1,500. This way everyone has a stake in being responsible citizens and voters.
Now we're sure this sounds fairly harsh to many readers because it would impose a burden on the lower income earners who presently pay zero taxes. So let's make a very strategic change here. Let's switch from a "net income" tax to a "gross profits" tax in order to get our government revenues.
When we use the term "gross profits," we mean the profits of everyone, corporations, small businesses, and individuals alike. We all make profits in some way by selling products, or services, or labor.
Since gross profits would give us a much larger taxable base than net income we can employ a lower rate -- approximately 10%. And because everyone would have to pay it, a 10% gross profits tax would possess the power to stop infinite demand for government services. But what's most important is this -- it would not impose a net burden on the lower income earners! The reasons why are as follows:
The simplicity of a "gross profits tax" would be a tremendous boon to all businesses and corporations. It would save American industry hundreds of billions of dollars annually in income tax compliance costs that go toward record keeping, accountants, tax lawyers, economists, lobbyists, audits, appeals, lost opportunities, tax avoidance, etc., etc.
Prominent tax reform groups, such as Americans for Fair Taxation, maintain that consumers must pay an extra 5-10% every year for their goods and services because of the compliance cost burden of the income tax for businesses and corporations. So by eliminating these compliance costs we would create an annual savings of at least 5% in the cost of goods and services for all consumers.
Thus all low income earners who presently pay zero taxes would have to start paying a 10% tax, but they would be getting a 5% reduction in their annual cost of goods and services, which would wipe out half of the tax burden right off the bat. In addition, with enactment of the "gross profits tax" and its elimination of the compliance cost burden, there would take place a tremendous increase in capital accumulation and also in new entrepreneurial venture expansion, which are the two causes of real wage growth for the workingman. Thus we would be able to return to real wage growth of 3% every year, which we had in the years prior to 1972. For the past 35 years, our onerous tax system has reduced capital accumulation and entrepreneurial expansion in the marketplace to a lower rate of increase than the supply of labor is increasing every year. This is what has reduced "real wage growth" for the workingman to zero.
These are U.S. Dept of Commerce figures. This return to real wage growth would wipe out an additional 3% of the new tax burden for low income earners. In addition because of our enactment of Milton Friedman's auto-expansion plan for the Fed, we would be able to eliminate the inflationary burden that robs us all of our earnings at the rate of about 5% annually. This savings would wipe out still more of the new tax burden. So low income earners will be hit with a new tax of 10%, but they will receive a 13% increase in their standard of living as a result.
This will bring about a 3% net annual increase in the standard of living of all low income earners! [A 3% increase in real wages, plus a 5% decrease in price inflation, plus a 5% decrease in the cost of goods and services from elimination of income tax compliance costs = 13% increase. Subtract the 10% gross profits tax, and you have a 3% net annual increase in the standard of living.]
And, of course, other income earners will experience even higher increases. Because of this new tax policy, there will take place a vibrant explosion in economic growth for our country. This would make everyone much, much better off. And as an added benefit, the "gross profits tax" would bring many of our corporations back to America from the offshore havens they have migrated to over the past 30 years. It would light up the sky of economic productivity and wealth creation for our country.
Moreover everyone's lives would be so much simpler. We would be able to fill out our tax returns in 10 minutes every April because record keeping for gross profits is miniscule compared to net income.
But most importantly because all voters would have to pay such a "gross profits tax," it would quickly bring about a serious reduction of government. Every state in the Union would begin sending Ron Pauls to Congress instead of Chuck Schumers. As a result the 10% tax rate could be gradually lowered. We could have a 7% tax rate within a decade or so because no one would continue to vote for all the pork and privileges if they had to pay for them out of their own pockets.
This is the all-important element in the Two Pillars Strategy. It is the linchpin to set in motion the phasing out of Big Government: All voters must pay proportionally out of their own pockets for their government services if we are to have a responsible government and a free society. This is why we are losing the battle to statism. Ever since 1913, we as a people have refused to face this fundamental reality of political life.
Now the question we have to ask is this: Could a 10% gross profits tax win the support of a majority of American voters? No, it could not, not at this time. But as we will soon see, our goal is not to win 51% of the voters. Our immediate goal is only to win 15% of the voters and make it into the national TV election debates to act as a powerful counter vision to the insanity of the Demopublicans.
Therefore, our second pillar of reform must be to end the policy of progressive taxation and its something-for-nothing mindset that is stultifying our nation. These then are our two paramount goals -- honest money and equal tax rates! These are the TWO PILLARS that must be used to challenge the Demopublican establishment.
Thus we build our party upon a 4% auto-expansion plan for the Fed, and a 10% gross profits tax for all citizens. This will increase everyone's standard of living immensely and immediately. It will change the political paradigm of America in a powerfully dramatic way.
Can these Two Pillars be explained to the American voters in large enough numbers to make a difference? Yes, they can! Imagine, if you will, a dynamic third party candidate in the debates giving a 30 minute lecture on nationwide TV the night before each of the debates like Ross Perot did in 1992. Only this time the lectures are about how "progressive tax rates" are destroying our country, how "infinite demand" for government services stems from the progressive tax system, and how the Fed's irresponsible expansion of the money supply robs us of 5% of our wealth every year. These are the reasons why government constantly grows. Such lectures would be positively electrifying.
Here lies the only solution to our runaway government growth in
America. We must propose a proper tax system to the voters and start educating them about why we need to end all tax exemptions and require everyone to pay something toward the cost of government. We must explain how the Fed is robbing us of our currency's value every year. Only in this way can we restore a responsible electorate and send responsible politicians to Washington. If a third party wishes to become viable, it must offer radical enough change to separate itself from the Demopublicans, but not so radical that it becomes marginalized like the Libertarians. If the FREE AMERICAN PARTY would run a candidate with name recognition, it could easily gain 15% (and probably 20%) in the polls, which would qualify it for the national TV election debates every year. It would then have a national podium to disseminate its ideas out to 100 million voters, which would scare the living daylights out of the Demopublicans in
Washington.
As a result, it wouldn't be too long before Demopublicans would be offering their own honest money plan and their own equal rate tax. And if they didn't, the nation's voters would increase their support every year for the FREE AMERICAN PARTY until either the Demopublicans relented and enacted the two pillars into law themselves, or the Free American Party achieved parity with the Demopublicans and actually won on election day. Either way, the Free American Party would win because its two pillars would be implemented.
With implementation of the two pillars, big government would die, and freedom would be reborn. Thus a third party does not have to win the White House immediately to win its cause! But it does have to gain entrance into the national TV election debates.
These three debates are televised to 80-100 million voters by the major networks. It is these debates that legitimize a candidate and his party in the people's eyes. They are absolutely essential to participate in if a third party is to have a chance to change the role of government in America.
The main reason why statism is growing relentlessly in our country today is because there is no counter vision being effectively presented to the voters at election time. What is needed is to present the people with a choice between big government and small government in a way that does not sound utopian. This has never been done in the 48 year history of the debates.
Therefore the all-important goal is to get 15% in the polls and gain admission into the National Election debates, which will give the FREE AMERICAN PARTY access to 100 million voters with its powerful pillars of monetary and tax reform.
The freedom movement is now a major philosophical force in America, and it needs to create an effective political party to speak for it.
But this is most important! The Free American Party cannot threaten voters with the dissolution of the welfare state. It cannot sound like Harry Browne. Its message must simply be that we have to check the explosive growth of government in order to bring back sanity to our country, and that this will require policies of "honest money" and "equal tax rates" to be enacted.
In other words, we cannot sound libertarian. We have to sound like the Democrats and Republicans except for the Two Pillars. This is the only way to obtain the 15% necessary to get into the national TV election debates.
Such a third party (if led by the right candidate) would have a powerful, galvanizing appeal to all Americans, which would capture 15% of the vote, then 25%, then 35% and eventually victory in a three-man race. Millions of voters would rally around such a cause. The fear that would rise up in the establishment crowd would be heart pounding. Their corrupt game of buying votes through debasement of the currency and progressive taxation would be over.
The time has come to form a third political party that actually has the ability to make a difference. We could inject the two greatest issues of our day -- honest money and equal tax rates -- into the living rooms of 100 million Americans every election year. This would be big time, TV oriented, major league politics. It would rock the nation, it would make history, and most importantly, it would stop the growth of the Federal Leviathan cold.
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Thank you for your attention; we hope to hear from you. These are grave times that will only get worse as government grows bigger. Help us to reverse this insidious destruction of our country and restore the Constitutional system that the Founding Fathers gave to America.
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