Marcy criticizes U.S. policy for conflating the drug war and the Cold War, assuming that only leftist forces were benefiting from the drug trade, pressuring South American governments to suppress cocaine supplies using armed force, assisting those countries in eradication efforts by training and equipping their militaries, destroying coca crops by spraying dangerous herbicides without providing options for alternative crops, and ignoring the U.S. demand for cocaine as an important part of the problem.

Although Richard Nixon started the “war on drugs,” Ronald Reagan militarized it and believed the drug trade to be a unique transgression among leftist groups during the Cold War, despite the heavy involvement of his beloved Nicaraguan Contras and many nonleftist government leaders. Contrary to counterinsurgency warfare doctrine, the forced eradication programs turned the coca farmers away from their governments and toward leftist guerillas. Sending the local military to eradicate farmers’ crops only strengthened the bond between the farmers and leftists, and led to corruption in the region’s militaries.

Bill Clinton weakly attempted to reduce U.S. drug demand, but he and George W. Bush both continued the failed, militarized supply-suppression policy aimed at Latin America. Marcy concludes that except for a slight decline in the late 1990s, drug production in the Andes has remained constant or risen since the inception of the drug war in 1970. Between 2003 and 2006, for example, Colombia’s coca production increased by almost 38 percent. In 2007 coca growers expanded land under cultivation and farmers were learning to adapt to eradication efforts.

Marcy’s critique of U.S. policy seems spot on, but his solution leaves something to be desired. He acknowledges that some experts have urged drug legalization but concludes that this option is not yet politically possible in the United States and may actually cause more problems than it solves in northern Andean regions. He argues that rich landowners would benefit from legalization by seeing coca-growing land become more valuable, or multinationals would swoop in and snap up the drug profits—leaving most coca farmers poor in a semifeudal system. But Marcy seems a bit oblivious to the economics of drug production, which would predict that legalization would decrease the price of drugs and therefore lower the value of drug-producing land. Furthermore, most of the profits earned on drugs derive from the risks taken in an illegal business, so most of the losses would fall on cocaine laboratories and traffickers.

Marcy laments that eradication has always trumped providing markets for alternative crops. Yet even if U.S. policy could provide markets for alternative crops, the illegality of drugs likely would make profits from growing cocaine much more lucrative than any other possible crop. And legalization—by reducing drug profits and taking the fire out of the wars funded by them—is also the best way to provide incentives for guerillas to put down their weapons.

To his credit Marcy recommends decriminalization of drugs in the United States to put downward pressure on the price, and thus the production, of cocaine. Economists believe such demand-reduction strategies are superior to supply-suppression strategies. He notes that the northern Andean region is so large and remote that controlling drug production there is impossible. Cocaine growing, production, and trafficking just move around in response to futile efforts by authorities—whether local or a distant superpower—to stamp them out. While Latin American countries correctly complain about U.S. demand being the primary factor, the United States has maintained its costly and ineffective supply-suppression policy for decades. Thus Marcy usefully suggests limiting the U.S. military presence in the region and getting local militaries out of the counter-drug mission.

The flaw in Marcy’s strategy is that it does not go far enough. True, drug legalization efforts are stymied by popular perceptions in the United States and, he observes, by entrenched antidrug bureaucracies in the United States and the northern Andes that garner jobs and large budgets from the war on drugs. But legalization is the only strategy that can work to eliminate the need for the costly—in lives, money, and corruption—war on drugs. Marcy, then, is wrong when he says that the war on drugs might ultimately be won by incremental changes in policy. The war must be abandoned.

Few historians, however, describe the costs of the war. Not just the 620,000 individuals who died, or the devastation to southern states, but the economic costs of waging total war. What was the economic impact of the Civil War on American life?

The first and most important point is that the Civil War was expensive. In 1860 the U.S. national debt was $65 million. To put that in perspective, the national debt in 1789, the year George Washington took office, was $77 million. In other words, from 1789 to 1860, the United States spanned the continent, fought two major wars, and began its industrial growth—all the while reducing its national debt.

We had limited government, few federal expenses, and low taxes. In 1860, on the eve of war, almost all federal revenue derived from the tariff. We had no income tax, no estate tax, and no excise taxes. Even the hated whiskey tax was gone. We had seemingly fulfilled Thomas Jefferson’s vision: “What farmer, what mechanic, what laborer ever sees a tax-gatherer of the United States?”

Four years of civil war changed all that forever. In 1865 the national debt stood at $2.7 billion. Just the annual interest on that debt was more than twice our entire national budget in 1860. In fact, that Civil War debt is almost twice what the federal government spent before 1860.

What’s worse, Jefferson’s vision had become a nightmare. The United States had a progressive income tax, an estate tax, and excise taxes as well. The revenue department had greatly expanded, and tax-gatherers were a big part of the federal bureaucracy.

Furthermore, our currency was tainted. The Union government had issued more than $430 million in paper money (greenbacks) and demanded it be legal tender for all debts. No gold backed the notes.

The military side of the Civil War ended when Generals Ulysses S. Grant and Robert E. Lee shook hands at Appomattox Court House. But the economic side of the war endured for generations. The change is seen in the annual budgets before and after the war. The 1860 federal budget was $63 million, but after the war, annual budgets regularly exceeded $300 million. Why the sharp increase?

First, the aftermath of war was expensive. Reconstruction governments brought bureaucrats to the South to spend money on reunion. More than that, federal pensions to Union veterans became by far the largest item in the federal budget (except for the interest payment on the Civil War debt itself). Pensions are part of the costs of war, but the payments are imposed on future generations. In the case of the Civil War, veterans received pensions only if they sustained injuries severe enough to keep them from holding a job. Also, widows received pensions if they remained unmarried, as did their children until they became adults. Confederates, of course, received no federal pensions.

Pensions and Tensions

The Civil War pensions shaped political life in America for the rest of the century. First, northern states benefited from pension dollars at the expense of southern states. That kept sectional tensions high. Second, Republicans “waved the bloody shirt” and blamed Democrats for the war. Republican presidents had incentives to keep the pension system strong, and the Grand Army of the Republic (GAR) lobbied to get as much money for veterans as possible.

The federal government established pension boards to determine whether injuries to veterans warranted a pension. But the issue was complex. Sometimes, veterans created or faked injuries; others argued that injuries received after the war—for example, falling off of a ladder while fixing a roof—were really war injuries. If the pension board turned down an application, the veteran sometimes pleaded to his congressman—who was often able to get a special pension for his constituent through Congress. The corrupt pension system corroded politics for the whole 1865-1900 period.

President Grover Cleveland tried to stop congressmen from voting pensions to constituents with bogus injuries by vetoing bill after bill. His successor, Benjamin Harrison, “solved” the problem by signing the Blair bill, which liberalized pensions to the point that even old age made a veteran eligible for a pension. During the 1890s, after most veterans had died, pension payments remained a huge and corrupting item in the federal budget.

The economic impact of the Civil War extended beyond pensions. One argument made during the war was that transportation needed to be improved to connect California with the other Union states. President Lincoln signed a bill establishing federal subsidies for building two transcontinental railroads.

Lincoln was a gifted writer and an able defender of natural rights, but on railroad subsidies he had a reverse Midas touch. During the 1830s, for example, when Lincoln was in the Illinois legislature, he helped lead the charge for a $12 million subsidy to bring railroads to the major cities of Illinois. Unfortunately for Lincoln, the money was wasted and the railroads largely went unbuilt. According to William Herndon, Lincoln’s law partner, “[T]he internal improvement system, the adoption of which Lincoln had played such a prominent part, had collapsed, with the result that Illinois was left with an enormous debt and an empty treasury.”

Bribes Across America

When Lincoln signed the transcontinental railroad bill in 1862, he was creating an even larger boondoggle. The Union Pacific and Central Pacific Railroads were to be paid by the mile to lay track from Omaha to Sacramento. Thus, the UP and CP had incentives to create mileage, but not quality mileage. Their railroads were sometimes not straight, and other times went over hilly terrain that was impossible for a train to surmount. When finished, parts of what they had built were unusable, but both lines had paid off politicians (with some of their subsidy money) to continue the subsidies and not inquire closely on how they were being spent.

Lincoln is not responsible for the corruption that occurred after he died, but the Republican leaders during the war committed themselves to many federal interventions other than the constructive one of ending slavery. The National Banking Act of 1863, and amendments to it, brought greater federal control to banking and imposed a 10 percent tax on state bank notes.

The Morrill Act of 1862 gave 17.4 million acres of federal land to states to build land-grant colleges to teach citizens agriculture and science. Gifts of land and statements of educational focus seem like minor interventions, but the Constitution gave no role to the federal government in subsidizing education or creating universities. The Morrill Act became an entering wedge for later interventions (the Hatch Act of 1887 and the Smith Lever Act of 1914) that established direct federal subsidies to those same land-grant colleges.

Once the federal government intervenes in an area, it’s hard to remove the controls and easy to expand them. The Gilded Age generation did, however, halt some of those Civil War interventions. Those moves back to freer markets in the late 1800s help account for the tremendous economic growth during that time.

Some Rollbacks

The starting point here is the decision after the Civil War to reduce the $2.7 billion national debt. From 1866 to 1893, the U.S. government had budget surpluses each year and slashed the national debt to $961 million. Annual revenue during these years was about $350 million and expenses were about $270 million—most of which consisted of Civil War pensions and interest on the national debt.

One reason the federal budgets tended to be lower in the 1880s than in the 1860s and 1870s was that interest payments on the debt declined sharply as the debt disappeared. For example, the annual interest on the national debt dropped from $146 million in 1866 to only $23 million in 1893. The generation that fought the Civil War became the politicians of the Gilded Age, and they had the fortitude to wipe out almost two-thirds of the Civil War debt.

Speaking of Civil War politicians, those in the Grant administration—long maligned by historians—established many of the conditions for the freedom and prosperity of the Gilded Age. For example, Grant helped make sure the U.S. government had budget surpluses by winning $15.5 million from Britain for damages done to Union ships by the Alabama and other ships the British built for the Confederates. In 1875 Grant also signed the Specie Resumption Act, which promised to redeem the Civil War greenbacks for gold. Grant committed the United States to a sound currency and fiscal restraint.

Also under Grant, the income and estate taxes were abolished in 1872. He committed the U.S. government to budget surpluses with revenue almost exclusively drawn from tariff duties and excise taxes on alcohol and tobacco. Even before Grant was able to abolish the income tax, he had it changed from a progressive to a flat tax.

The income tax during the Civil War—the first in U.S. history—was not onerous by today’s standards. Early in the Civil War, Congress passed a flat 3 percent tax on all income over $800 (which was much more than most families earned). Then Congress made the tax progressive and raised the top marginal rate to 10 percent.

When Grant had the income tax abolished, he returned the nation to the tax system envisioned by the Founders. In Federalist 21, for example, Alexander Hamilton defended a system of consumption taxes (tariffs and excises) against income taxes—which can be more divisive and more easily manipulated by politicians. Under consumption taxes, Hamilton argued, “The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources.”

Hamilton added, “If duties are too high, they lessen the consumption. . . . This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.”

After the Civil War, Americans chose to consume alcohol and tobacco in sufficient quantities to help pay down the debt each year for most of the rest of the century. American industry recovered under such limited government, and the Civil War generation paved the way for economic greatness. They overcame much of the financial damage from the Civil War.

A period of governmental corruption, monetary instability, gross expansion of political power, the solidification of public schooling, Anglo-Saxon racialist beliefs, manifest destiny, Indian Wars, and extreme violence, Reconstruction witnessed a giant leap toward a cohesive nation-state–far from the founding vision of a decentralized federal republic.

A mere two months before John Wilkes Booth assassinated him in 1865, President Abraham Lincoln met with his two top generals, Ulysses S. Grant and William Tecumseh Sherman, on the steamship The River Queen, just outside of Hampton Roads, Virginia. Though Lincoln would call for “malice toward none” and “charity for all” in his second inaugural, delivered in early March of the same year, he offered his fullest plan and desires for what a reconstructed union might look like in a private conversation with Grant and Sherman. Lincoln assured them he wanted nothing more than

to get the deluded men of the rebel armies disarmed and back to their homes. . . . Let them once surrender and reach their homes, [and] they won’t take up arms again. . . . Let them all go, officers and all, I want submission and no more bloodshed. . . . I want no one punished; treat them liberally all around. We want those people to return to their allegiance to the Union and submit to the laws.

While Lincoln had waged a terribly hard and total war, he also desired the softest peace possible. Indeed, if one takes Lincoln’s words on The River Queen at face value, the United States of 1865 would look very much like the United States of 1860, with one exception: Returning states would need to accept the emancipation of all slaves through the Thirteenth Amendment to the U.S. Constitution. His architects of total war, Grant and Sherman, agreed completely with the President. Neither of Lincoln’s generals knew how much longer the war would last, they explained to him, but they believed the war was rapidly approaching an end with possibly only one or two major battles left. They had reached the endgame.

When Booth cut down Lincoln at Ford’s Theater on Good Friday, two months later, he changed the entire course of American history. Had Lincoln presided over the peace, one has no reason to doubt, he would have reconciled constitutional relations with, among, and between the former Confederate states, officers, and citizens as quickly as politically possible. The war, after all, had been viewed by almost all sides as a noble tragedy for the common good of the republic and for the vision (no matter how varied) of the American founding fathers. Men, for the most part, had chosen to fight, and they had chosen to fight again and again. Though a draft existed in the North, for example, after the summer of 1863, 94 percent of all Union soldiers had volunteered. As General Joshua Chamberlain, the classicist from Maine’s Bowdoin College, had astutely observed of the surrender ceremonies in April 1865: “Honor answering honor. . . [as men] of near blood born, made nearer by blood shed. . . . On our part not a sound or a trumpet more, nor roll of drum; nor a cheer, nor word nor whisper of vain-glory, nor motion of man standing again at the order, but an awed stillness rather, and breathholding.”

Just outside of Appomattox Court House, Robert E. Lee’s former Confederate forces, what remained of the Army of Northern Virginia, walked through two lines of Union soldiers. The Union soldiers saluted the defeated for hours on end that day. “Reluctantly, with agony of expression,” Chamberlain recorded, the Confederate soldiers “tenderly fold their flags, battle-worn and torn, blood-stained, heart holding colors, and lay them down; some frenziedly rushing from the ranks, kneeling over them, clinging to them, pressing them to their lips with burning tears.”

Such a scene, of course, is a far cry from the militarization and politicization, the martial law and the intrusion of Leviathan that one normally associates with Reconstruction as it actually happened. Though President Jefferson Davis’s final executive order called for all Confederate States of America troops to divide into terrorist cells and launch attacks against civilians and urban areas, Lee countermanded the order through deed and word, telling the men to “be good citizens as they had been soldiers.”

With Lincoln’s death, though, the war became personal in a way that it had not been during the mass bloodshed of the previous four years. To many in the country, especially in the North, Lincoln’s death transformed him into a full-fledged American martyr, and his reputation exploded. The Radicals within the Republican party—Senator Benjamin Wade of Ohio, Senator Charles Sumner of Massachusetts, Representative Thaddeus Stevens of Pennsylvania, and Representative George Julian of Indiana, to name a few—manipulated this loss to their advantage more than any other group. These men  had despised and resented Lincoln as a spineless moderate, lacking a proper nationalist and vindictive streak.

The Radicals had attempted nothing less than a congressional coup against Lincoln in December 1862, openly desired a military dictatorship throughout much of the war, and proposed their own version of Reconstruction as early as 1863. Their vision of postwar America involved remaking the entirety of the South in their own image, with extensive punishment for all involved. Just as they had wanted Lincoln to wage an ever-increasingly hard war, they wanted a peace imposed by the sword. Lincoln’s death provided them with a symbol around which to rally northerners against their southern brethren. “Within eight hours of his murder Republican Congressmen in secret caucus agreed,” Lincoln biographer David Donald explained, “that ‘his death is a godsend to our cause.’” As the leader of the Radicals, Wade, stated, “[T]here will be no more trouble running the government.”

Wade and his fellow Radicals would have no small part in nationalizing the United States over the next dozen years. “The New England reformers thought they had struck down evil incarnate when they crushed the Sable Genius of the South; and their horror at the corruption and chaos of the Gilded Age was intensified proportionately as they discovered the extent of their own previous naiveté,” the cultural critic and historian Russell Kirk wrote in The Conservative Mind. “They had dreaded an era of Jefferson Davis; but now they were in an era” of the radicals and “of worse.” The true reformers “awoke to find their fellow-Republicans, the oligarchs of their party, intent upon concrete plunder.”

Not surprisingly, government grew dramatically during the four years of the Civil War. The Union printed greenbacks, founded the U.S. Secret Service to protect the fiat money (the second federal police force, the first having been set up after the passage of the Fugitive Slave Law of 1850), taxed incomes, promoted university education, built war factories and railroads, raised tariffs, declared—in some places—martial law and suspended freedoms of speech and habeas corpus, used troops to break labor strikes, and encouraged mobs to do what it believed it could not do openly.

In the South, President Jefferson Davis nullified the Confederate constitution almost from day one. Davis often ignored Congress and his own vice president, and he used the full power of his office to harass any political opposition. Most notably, through fraud Davis shut down the one opposition to develop, the classical-liberal Conservative Party of North Carolina. The Confederate States of America (CSA) taxed incomes, excess profits, and licenses, and raised tariffs on imports as well as exports. Because currency flowed only intermittently throughout the South, the CSA printed an outrageous amount of paper currency and established—to the horror of average southerners—the Tax-In-Kind men, empowered by the government to take whatever livestock, produce, and materiel they deemed necessary for the war effort. Unlike the North, the South conscripted throughout much of the war, set prices, and enforced loyalty oaths. The CSA, contrary to popular memory, also rigorously enforced its own laws against the several states making up the Confederacy.

With the collapse of the Confederate government, no confederate laws continued, of course. With the end of the war the Union repealed many, if not most, of its war measures. The legacy and symbolism of such martial laws, however, remained into the Progressive period and beyond: If Lincoln could centralize the Union and defeat the Confederacy and slavery, could we not also use the federal government to wage war against poor standards, poverty, immigrants, or whatever any Progressive might resent? Perhaps no figure better represents this than John Wesley Powell, a Union officer who lost his arm in the 1862 Battle of Shiloh and is often regarded as the father of American Progressives. Tellingly, through the Department of the Interior, the U.S. Geological Survey, and the Bureau of Ethnography, Powell crafted and promoted plans to remake the West (sometimes physically) through the powers of the federal government.

Believing the federal government under Lincoln had never gone far enough, the Radicals of Reconstruction expanded the scope and reach of the federal government as quickly as possible. Not only did the Fourteenth Amendment to the U.S. Constitution apply the Bill of Rights to the states, but it also repositioned virtually all federal law as superior to all state and local laws, thus attenuating even further the already difficult balance of federalism. Most Reconstruction laws began in the Radical-controlled congressional Joint Committee on Reconstruction, dominated by Wade. Most important, through the impetus of the Joint Committee, Congress passed a series of haphazard laws establishing martial law over various districts of the South. The rule of law, such as it was, was enforced through military rather than civilian courts. Through a series of laws Congress provided extensive funding for public schooling and welfare (direct aid) for freed slaves, and it sometimes enforced the property rights of blacks.

None of this should suggest that somehow the Radicals were, as a whole, pro-black. As the Pulitzer prize-winning historian T. H. Williams once noted, the Radicals “loved the Negro less for himself than as an instrument with which they might fasten Republican political and economic control upon the South.” In reality the Radicals were little better in their promotion of rights, dignity, and liberties of blacks than had been the plantation owners of the previous generations.

Each group—white men of the North and South—desired to manipulate the black population for its own aggrandizement and profit.

As Robert Higgs has definitively shown in his path-breaking work, Competition and Coercion, American freedmen did exceedingly well in terms of culture, economics, and literacy in the 50 years after emancipation, but did so through their own efforts and despite significant government and societal obstacles: “Free from competitive counterpressures and strongly equipped to enforce compliance, public officials could discriminate pretty much as their pleasure or caprice might dictate. Under these circumstances it was a definite blessing for the blacks that the governments of the post-bellum South were still quite limited in the range of functions to which they attended. Such salvation as the black man found, he found in the private sector.”

Not surprisingly, given the abusive attitudes white Radicals held toward American blacks, corruption proved endemic to the entire Reconstruction effort. So much money flowed from Congress into the reconstructed South that manipulators and opportunists profited wherever and whenever possible, which was more often than not. The Reconstruction governments simply had no manpower or will to prevent the corruption. They often participated directly in the corruption, using it for political gain. The famous nineteenth-century Scottish observer of America, James Bryce, recorded his own thoughts on the period in The American Commonwealth: “Such a Saturnalia of robbery and jobbery has seldom been seen in any civilized country, and certainly never before under the forms of a free self-government.” He compared the American officials of Reconstruction to Roman provincial governors in the last days of the Republic:

Greed was unchecked and roguery unabashed. The methods of plunder were numerous. Every branch of administration became wasteful. Public contracts were jobbed, and the profits shared. Extravagant salaries were paid to legislators; extravagant charges allowed for all sorts of work done at the public cost. But perhaps the commonest form of robbery, and that conducted on the largest scale, was for the legislature to direct the issue of bonds in aid of a railroad or other public work, these bonds being then delivered to contractors who sold them, shared the proceeds with the governing ring, and omitted to execute the work. Much money was however taken in an even more direct fashion from the state treasury or from that of the local authority; and as not only the guardians of the public funds, but even, in many cases, the courts of law, were under the control of the thieves, discovery was difficult and redress unattainable. In this way the industrious and property-holding classes saw the burdens of the state increase, with no power of arresting the process.

While almost all white leftist historians have downplayed or ignored this corruption since the 1960s, they have done so at great peril to the dictates of honesty and truth.

As they had failed to do with Lincoln in the attempted congressional coup of December 1862, the Radicals tried to gain control of President Andrew Johnson’s cabinet with the Tenure of Office Act. When Johnson violated this law in February 1868, the House of Representatives impeached him on a strict party-line vote, 126-47. The failure of the Senate to support the House’s impeachment undercut the strength and confidence of the Radicals. Indeed, though Radical regimes remained in power until 1876, the Radicals never again wielded the same kind of power as they had in the second half of the 1860s.

In part the Radicals also failed because Ulysses S. Grant never accepted the fanatical premises on which Radicalism had developed. A moderate Republican at best, Grant resented the postwar bloodthirstiness of the Radicals, few of whom had ever seen battle. Despite this, Grant was a determined nationalist and, when he was not dealing with the corruption in his own administration, he was promoting “Americanness” wherever possible. This became most clear in his policy toward the American Indians.

U.S. government relations with the Indians had never been consistent. They had gravitated between vicious brutality (as had been the case under Andrew Jackson) and respect and protection of Indian property (such as under Franklin Pierce). After the Civil War, under the Johnson and Grant administrations, the U.S. government waged a fierce war against the Indians, confiscating their best property, relegating what remained of the tribes to the worst land. The greatest atrocity committed by the federal government against the Indians came just at the very end of Reconstruction. After a tragic misunderstanding, the military decided to round up, forcibly remove, and detain a sizable minority of the Nez Perce Indians, a tribe faithfully allied to America since 1805. When the Nez Perce understandably resisted, the government spared neither time nor expense to defeat them. As The Nation reported in 1877:

How far the Indian insurrection on the Pacific Slope is for the present suppressed is not decided, but it were well, while its lesson is fresh, to realize that the Nez-Perces are not to blame for the expensive and sanguinary campaign, unless being goaded into a brief madness by the direct and endless oppression of our Federal authorities be blameworthy. . . . [T]he neglect and bad faith of the general Government, continued for a quarter of a century, are apparent in the records of Congress. There was swindling, not in petty matters and by individuals, requiring detection and proof, but on a grand scale by the United States itself.

It would be difficult to find a more telling example of government corruption and abuse of power during this period than the directing of the military against a peaceful, allied people, farmers and ranchers who had been occupying the same land—the Palouse and Camas Prairies of the Pacific Northwest—for nearly 500 years.

Nation-building always and everywhere demands conformity and destruction of local and individual differences. To overcome such divisions, the builders must create a religious type of myth and fundamental symbols to rally the population and with which to defend the new nation with unrelenting force. The Reconstruction government did all of this without apology, and immigrants (especially Roman Catholics), blacks, and Indians suffered intensely. “Nationalism in the sense of national greed has supplanted Liberalism,” E. L. Godkin, one of the great classical liberals of the day and the founder of The Nation, noted in hindsight in 1900. “We hear no more of natural rights, but of inferior races, whose part it is to submit to the government of those whom God has made their superiors.” Americans, Godkin argued, had forsaken the Declaration of Independence as well as the Constitution. Further, he wrote, “The great party which boasted that it had secured for the negro the rights of humanity and of citizenship now listens in silence to proclamations of White Supremacy.”

Men who had fought valiantly on the battlefields of the Civil War must have asked themselves what, if anything, it had all meant.

In Last Call: The Rise and Fall of Prohibition, a brilliant and exhaustively researched book, David Okrent examines the forces behind the enactment and repeal of Prohibition as well as its consequences, both intended and unintended. From 1920 until 1933 most Americans were forced to choose between abstinence and illegal consumption. But Americans loved to drink: Per capita alcohol consumption in the nineteenth century was three times today’s rate. It’s no surprise that so many chose to continue their consumption illegally.

If the goal of Prohibition was to eliminate, or even reduce, many of the problems associated with alcohol consumption—such as criminal activity, binge drinking, drunk driving, and deaths and injuries via alcohol poisoning—it was an unambiguous failure. As Okrent illustrates, after 13 years of speakeasies, corrupt enforcement, and criminal empires, the repeal movement had little difficulty in convincing a beleaguered public that Prohibition was a mistake.

However, this is not to say that Prohibition was entirely ineffective. If the goal was to reduce overall consumption of alcohol by increasing its price, Prohibition worked largely as intended. Initial consumption declined to 30 percent of its pre-Prohibition level, though this number rose to 70 percent within three years and stayed roughly at that level by the time of repeal. However, even for its advocates this is an odd measure of success for prohibition. Also worth noting is that repeal did not bring about a significant increase in drinking. Per capita consumption rates did not reach their pre-Prohibition levels until 1973.

Enforcer Colonel Ira L. Reeves bitterly stated at the end of his term that the only thing he had accomplished was that he “had raised the price of alcoholic beverages and reduced the quality.” This was a declaration of frustration and defeat, an admission he had been unable to remove alcohol from the American way of life. In line with this assessment, one of the main lessons Okrent derives from Prohibition is that government cannot effectively legislate against people’s tastes.

Okrent primarily focuses on the battle between the “wet” and “dry” political movements dating from the mid-nineteenth century until the 21st Amendment and the repeal of Prohibition in 1933. Both sides had their share of notable and influential characters, perhaps none more so than the dry Wayne Wheeler, leader of the Anti-Saloon League (ASL). In the history of American politics, no interest group has been as influential as the ASL and few individuals have had as much direct impact on public policy as Wheeler. H. L Mencken, a dedicated wet, wrote of Wheeler: “In fifty years, the United States has seen no more adept political manipulator.”

Wheeler and the ASL, supported primarily by rural Protestant voters, had a stranglehold over Congress and most state legislatures during most of Prohibition. Okrent writes that the Wheeler-led ASL “effectively seized control of both the House and the Senate in the 1916 elections” and did not loosen its grip until the early 1930s.

Perhaps the most enlightening, and disturbing, revelation in the book is how the ASL became the most powerful pressure group the nation had ever known and how the dry movement was able to enforce its will on a population that loved to drink. Most people are familiar with Prohibition-era stories involving corrupt police and politicians taking bribes from bootleggers like Al Capone. What most people are unaware of, however, is just how openly most members of Congress manipulated the political process to push Prohibition on a largely unwilling public.

A primary reason Prohibition happened was that the dry rural voters in favor of it were vastly overrepresented in state legislatures and in Congress. To get an idea of just how overwhelming this discrepancy was, consider that by 1929 a staunchly wet congressional district in Detroit had a population of 1.3 million, while ten separate dry districts in the Missouri had fewer than 180,000 people total. This disparity was the work of dry legislators, who blocked reapportionment and thus denied accurate representation to wet districts that were experiencing unprecedented immigration. Okrent summarizes the significance of the situation aptly: “Never in American history, not even during the tumult of Civil War, had Congress disregarded the constitutional mandate, enunciated in Article 1, Section 2, to reapportion itself following completion of the decennial census. . . . Between 1921 and 1928, forty-two separate reapportionment bills were introduced in the House. Not one became law.”

Although political manipulation was vital to the dry movement, Prohibition would not have passed if not for the support of one of the broadest coalitions in American history. The diverse movement behind the Eighteenth Amendment and the Volstead Act included such groups as the Ku Klux Klan, the American Medical Association, the women’s suffrage movement, and the Industrial Workers of the World, to name a few. Although these groups were diametrically opposed on most issues, each saw potential advantages from Prohibition.

Baptists and Bootleggers and Doctors and Coke

Prohibition provides a clear illustration of one of the basic lessons of Public Choice economics: Interest groups use the political process to concentrate benefits on themselves while dispersing costs on others. The AMA, for example, foresaw the potential for a lucrative business providing prescriptions for alcohol under the Volstead Act for roughly $3 (or about $33 in 2010 dollars). Although in 1917 the AMA ruled that the use of alcohol in therapeutics “has no scientific value,” after two years of Prohibition the organization declared alcoholic beverages to be useful in the treatment of 27 separate conditions including diabetes, asthma, and old age. The AMA’s sudden change in medical advocacy was in line with its self-interest.

The AMA was not alone in this regard. Asa Chandler, the founder of the Coca-Cola Company, was an ardent supporter of Prohibition because he saw the potential to eliminate the competition provided by brewers and distillers. Chandler was rewarded for his vision: Coca-Cola saw sales triple. Charles Walgreen expanded his drug store chain from 20 to 525 stores during the 1920s. Although family historians have credited this expansion to the invention of the milkshake, the profitable trade in medicinal alcohol provides a more likely explanation.

Making Matters Worse

As important as it is to understand how Prohibition passed, it is even more important to understand why it made many alcohol-related problems worse. Prohibition failed in this sense because the policymakers behind it failed to predict how consumers, suppliers, and regulators would respond. Many people continued to drink, and a multitude of bootleggers, violent mobsters, and corrupt politicians were willing to provide a continuous supply.

As with most cases of failed social engineering, the people who advocated Prohibition suffered from a conceit that it would work exactly as intended. The economist Irving Fisher, known for his groundbreaking work on interest rates, claimed in 1919 that Prohibition would increase national output 10–20 percent every year. Although alcohol consumption remained high, Fisher continued to attribute the growth of the 1920s to Prohibition.

Per capita alcohol consumption returned to around 70 percent of its pre-Prohibition levels by 1923 because a multitude of entrepreneurs were willing to operate outside of the law to quench the public’s thirst. The infamous Purple Gang controlled the vast alcohol traffic flowing from Canada through Detroit, while New York mobsters like Charles “Lucky” Luciano launched their long criminal careers in the illicit alcohol trade. The notorious Chicago bootlegger and gangster Alphonse Capone said of his profession, “I give the public what the public wants. I never had to send out high pressure salesmen. Why, I could never meet the demand.”

This is not to say that Capone or his contemporaries were unfamiliar with the use of force. Since Prohibition drove the market for alcohol into the illegal sector, men like Capone had to rely on extralegal measures to enforce contracts and resolve disputes. Sometimes these measures included violence. To get an idea of just how much, consider the homicide rate. In the United States it went from less than 12 per hundred thousand people in 1920 to 16 by the end of Prohibition, then subsided to less than 10 by 1940.

Nonviolent Means

Not all bootleggers were violent, however. Men like Samuel Bronfman and William “Bill” McCoy specialized in the importation of alcohol through ports and border towns all over the country. Once these specialists had evaded or bribed Prohibition agents and local politicians to bring their products into the country, they would sell them to gangsters like Luciano who handled the massive distribution to local speakeasies. New York, for example, had roughly 32,000 speakeasies during the height of Prohibition.

Although some Prohibition agents could not be bought, the prevalence of corruption throughout the era was staggering. Okrent illustrates countless examples of rampant opportunism by Prohibition enforcers. Chicago Mayor Bill Thompson, for example, received more than a quarter of a million dollars directly from Capone’s organization for his 1927 campaign. Ranking police captains amassed bank accounts approaching hundreds of thousands of dollars on salaries ranging from $2,500 to $4,000 a year.

The bootleggers controlling the black market in alcohol were actually more likely to support dry politicians in favor of Prohibition than wet politicians favoring repeal. The logic behind this strategy is simple: Bootleggers and gangsters needed Prohibition to stay in business. If alcohol were legal they would quickly be replaced by legitimate companies. The ideal combination from the criminal perspective was dry policy and corrupt enforcement, and they spent whatever was necessary to make this happen.

To understand why criminals were willing to spend so much to ensure political cooperation and endure work-related hazards like gang warfare, it is necessary to know just how much was at stake. Annual sales of bootleg liquor were estimated at $3.6 billion in 1926, which is roughly $43.4 billion in 2010 dollars. This astounding sum was about the same as the federal budget that year.

Why Not More Violence?

Given the stakes, the real puzzle is why more violence did not occur. Events such as the St. Valentine’s Day Massacre, where Capone’s South Side Gang killed seven rival gangsters, garnered a lot of attention in the national press. The extended periods of peace, stability, and even cooperation that occurred both between and within different criminal enterprises, however, have generally gone unnoticed.

Seattle bootleggers convened in 1922 to set prices and, more important, to establish rules to minimize conflict. Similar meetings occurred in Philadelphia, New York, and other major cities throughout the 1920s. Despite the enormous amount of money at stake, most areas of the country where alcohol remained avoided outright gang warfare.

The fact that economic activity of the same magnitude as the U.S. government could be organized outside of the law is surprising for a number of reasons. Those who choose a life of crime tend to be violent, impatient, and untrustworthy by nature. Despite these obstacles, criminals often discover ways to cooperate on a large scale to capture illicit profits.

Besides the use of violence, how did a bunch of violent, impatient criminals manage such organizational stability? They employed reputation, costly signaling, and constitutions as means to enforce agreements and resolve disputes. Criminals worked hard to avoid conflict where possible because conflict is costly. Gangsters like Capone and Luciano were driven to cooperate with other criminals by the same economic forces underlying cooperation between their law-abiding counterparts.

It is important to understand the robustness of criminal organization for a number of reasons. For one, it explains to a large extent why Prohibition was doomed to failure. If there is a strong enough demand, legal prohibitions on certain goods and services will simply shift markets into the waiting arms of the illegal sector of the economy.

That criminals could engage in complex economic interactions outside of the law also illustrates some important lessons for the robustness of self-enforcing exchange in general. If criminals are capable of overcoming major obstacles to organization and exchange, then conventional arguments that the State is necessary for cooperation and exchange to occur must be reconsidered. Even in an environment of mistrust and violence, firms were formed, contracts were honored, and disputes were mostly settled peacefully. A better understanding of these processes can shed considerable light on the ability of individuals to cooperate and trade in the absence of a formal legal framework.

This is not to say that criminal organization is the pinnacle of achievement in a market economy. On the contrary, the experience of black markets brought about by Prohibition illustrates how inefficient they are relative to markets with well-defined and legally enforceable property rights. Overall quality diminished, while fraud, theft, and violence increased. Criminal cooperation also periodically broke down into outright gang warfare, though as noted, this was generally the exception to the rule. The important lesson, however, is that under Prohibition, criminal suppliers found a way to meet the public’s demand despite all the obstacles they faced.

Although Okrent avoids making any explicit comparison between the prohibition of alcohol and the ongoing prohibition of certain recreational drugs, there are a number of obvious similarities. Criminal organizations continue to provide a seemingly limitless supply of illegal drugs; quality is low, potency is high, and corruption and violence are endemic.

Some 28,000 people have died in the border war between drug cartels and United States and Mexican government agents since 2006. Street gangs continue to battle over territorial distribution rights. As Nobel Prize-winning economist Milton Friedman aptly said, “Al Capone epitomizes our earlier attempts at Prohibition; the Crips and Bloods epitomize this one.”

Examples of Legalization

As was the case with the prohibition of alcohol, advocates of the “war on drugs” often claim that decriminalization would result in a massive spike in drug use. Although it is impossible to know in advance exactly how much consumption would increase, the experience of Portugal could provide some clues.

Since the decriminalization of all drugs there in 2001, user rates have not increased and remain near the lowest in Europe. Sexually transmitted diseases and deaths due to drug usage have decreased significantly (see Glenn Greenwald, “Drug Decriminalization in Portugal: Lessons for Creating Fair and Successful Drug Policies,” Cato Institute, April 2, 2009).

Just as Coca-Cola and the AMA lobbied for alcohol prohibition because it was in their economic interest to do so, a number of groups have a vested interest in the war on drugs. One illustrative example is the California Beer and Beverage Distributors, which donated money to oppose last year’s unsuccessful ballot proposition to legalize marijuana in California. History rhymes in interesting but predictable ways. This behavior is consistent with the lessons of Public Choice. The distributors, like Asa Chandler of Coca-Cola 90 years earlier, see prohibition as a means to eliminate competition.

The unfortunate reality is that despite the diagnosis of failure for prohibitions past and present, policy-makers often prescribe a further dose of the same failed policies. In 1926 Wayne Wheeler said the “very fact that the law is difficult to enforce is the clearest proof of the need of its existence.”

Judges also make bad calls sometimes. We know this because there is a judicial form of instant replay: the appeals process, including review by the U.S. Supreme Court. Occasionally, even the politically diverse Court clearly indicates to a lower court, through a unanimous decision, that the judge(s) blew a legal call.

Umpire Jim Joyce’s blown call cost Detroit Tigers pitcher Armando Galarraga the 21st perfect game in major league baseball history. After watching the televised replay, Joyce immediately (and tearfully) admitted his mistake. This notwithstanding, baseball commissioner Bud Selig declined to change the call. But would he have acted differently if Joyce had maintained, in the face of overwhelming evidence to the contrary, that his call was correct—or even worse, that he deliberately called the runner safe?

Turning back to the law, what happens if lower-court judges thumb their collective noses at the Supreme Court? This is a timely question, because it is about to be placed squarely in front of the Supreme Court.

In early 1999 John and Theresa Sophocleus were forced out of their home by Alabama’s Department of Transportation (ALDoT) as part of a highway-widening project. In court ALDoT representatives testified that they needed to raze the home immediately to ensure timely progress on the road project. In fact, the Sophocleus home was not razed for nine months, during which it was used as a residence for contractors employed by ALDoT. In other words, the specific public purpose given by ALDoT to justify the seizure, made under threat of $10,000-per-day fines, proved to be invalid.

Mr. and Mrs. Sophocleus sued ALDoT, arguing that the taking was unconstitutional since the state did not live up to the expressed public purpose used to justify the seizure and that therefore ownership should revert to them. The first federal judge to consider motions in the case, Susan Walker of the U.S. District Court for the Middle District of Alabama, issued three summary judgments in their favor. Their case then was taken over by Judge Myron Thompson of the same court, who ruled that they should have taken their claim to the state courts rather than the federal courts. But as Alabama State Code 18-1A-et seq. makes clear, as affirmed by Judge Walker, the correct venue for plaintiffs in a civil rights case is the federal judiciary. By an 8–0 ruling (Justice John Roberts had not yet joined the Court) the Supreme Court in 2005 remanded the case back to the district court for remedy.

After stalling four full years, Judge Thompson and the judges on the 11th Circuit Court of Appeals refused to admit the earlier call had been blown and reiterated the previously overturned position. Once again, Mr. and Mrs. Sophocleus will appeal to the Supreme Court.

The original writ they filed with the Supreme Court was only 12 pages long. Their point, simple and powerful, was supported fully by the Supreme Court. Make no mistake—a unanimous Supreme Court decision overturning their ruling means the lower court was told, loudly, that it blew the call. So why did it take Judge Thompson over four years to respond? One interpretation is that he knowingly intended to frustrate the stated direction of the Supreme Court by delaying remedial action until either Mr. and Mrs. Sophocleus or their critical witnesses died or became mentally incapacitated. More important: Why, in the face of overwhelming evidence to the contrary, has the lower court refused to admit it blew the call? This is the critical question for all Americans who believe that they live under the rule of law.

Presumably, the Supreme Court has a deep interest in whether lower-court judges follow their instructions—that is, actually follow the law. The law of the land is enshrined in the Constitution as interpreted by the Supreme Court. If lower-court judges do not pay attention to the Supreme Court, they are not upholding the law. By implication, we do not live under the rule of law; rather, we live under the arbitrary and capricious rule of rogue judges, with justice denied when it suits their purpose. The judge is attempting to deny the rule of law to Mr. and Mrs. Sophocleus.

Rogue judges impose their own capricious rulings because they know there is little consequence for their actions. By virtue of lifetime appointments to the federal bench, and with scant likelihood of impeachment by Congress, they can use the legal process and their position to effectively deny justice to victims of civil rights violations. We all have a critical stake in curtailing this type of judicial behavior.

There is one, and only one, remaining protection for Mr. and Mrs. Sophocleus against the denial of justice orchestrated by rogue Judge Thompson and the complicit appellate judges: Instead of remanding the case back to the lower court for remedy again, presumably with the same expected result, the Supreme Court should impose a remedy. Under the best of circumstances, the chance that the Supreme Court will take a particular case is remarkably slim. Nonetheless, the Sophocleuses hit a home run their first time at bat, but have been denied justice due to interference by rogue umpires. We can only hope that on appeal this time, the Supreme Court ensures that their previous home run is ruled a grand slam on behalf of all Americans.

Your life and liberty may still be safe, but have you ever gone to a government surplus auction? Consumer reporters like me tell people, correctly, that they are great places to find bargains. People can buy bikes for $10, cars for $500.

But where did the government get that stuff? Some is abandoned property. But some I would just call loot. The cops grabbed it.

Zaher El-Ali has repaired and sold cars in Houston for 30 years. One day, he sold a truck to a man on credit. Ali was holding the title to the car until he was paid, but before he got his money the buyer was arrested for drunk driving. The cops then seized Ali’s truck and kept it, planning to sell it.

Ali can’t believe it

“I own that truck. That truck done nothing.”

The police say they can keep it under forfeiture law because the person driving the car that day broke the law. It doesn’t matter that the driver wasn’t the owner. It’s as if the truck committed the crime.

Something has gone wrong when the police can seize the property of innocent people.

“Under this bizarre legal fiction called civil forfeiture, the government can take your property, including your home, your car, your cash, regardless of whether or not you are convicted of a crime. It’s led to horrible abuses,” says Scott Bullock of the Institute for Justice, the libertarian law firm.

Bullock suggests the authorities are not just disinterested enforcers of the law.

“One of the main reasons they do this and why they love civil forfeiture is because in Texas and over 40 states and at the federal level, police and prosecutors get to keep all or most of the property that they seize for their own use,” he said. “So they can use it to improve their offices, buy better equipment.”

Obviously, that creates a big temptation to take stuff.

This is serious, folks. The police can seize your property if they think it was used in a crime. If you want it back, you must prove it was not used criminally. The burden of proof is on you. This reverses a centuries-old safeguard in Anglo-American law against arbitrary government power.

The feds do this, too. In 1986, the Justice Department made $94 million on forfeitures. Today, its forfeiture fund has more than a billion in it.

Radley Balko of Reason magazine keeps an eye on government property grabs: “There are lots of crazy stories about what they do with this money. There’s a district attorney’s office in Texas that used forfeiture money to buy an office margarita machine. Another district attorney in Texas used forfeiture money to take a junket to Hawaii for a conference.”

When the DA was confronted about that, his response was, “A judge signed off on it, so it’s OK.”

But it turned out the judge had gone with him.

Balko has reported on a case in which police confiscated cash from a man when they found it in his car. “The state’s argument was that maybe he didn’t get it from selling drugs, but he might use that money to buy drugs at some point in the future. Therefore, we’re still allowed to take it from him,” Balko said.

“When you give people the wrong incentives, people respond accordingly. And so it shouldn’t be surprising that they’re stretching the definition of law enforcement,” Balko said. “But the fundamental point is that you should not have people out there enforcing the laws benefiting directly from them.”

Balko is exactly right.

Let’s start by acknowledging that there is no question whatsoever that the sale and use of narcotics in our country could be virtually eliminated. It could be accomplished at a monetary cost far less than the hundreds of billions spent so far in the nation’s “war on drugs.” We could suspend habeas corpus and constitutional guarantees against unreasonable searches to more easily gather evidence on people who use or sell drugs. We could make those arrested bear the burden of proof of innocence and on conviction summarily execute them. Countries with far less wealth and far fewer police resources than ours have used that strategy to reduce drug use, and so could we. Thankfully, I think most Americans would, and should, recoil in disgust at that kind of drug-war strategy. So we have to examine less draconian measures. A few thoughts on the economics of drug trade might give us guidance.

There’s no mystery why people use mind-altering drugs: It makes them feel good, at least temporarily. That’s not only true of cocaine, heroin, and marijuana; it’s also true of mind-altering products like cigarettes, cigars, coffee, tea, wine, and whiskey. There’s considerable evidence that many people prefer their vices in a diluted form. Hence the popularity of filtered cigarettes, light beer, wine coolers, and mixed drinks. The same seems to be true, at least to some extent, about illicit drugs.

When what are seen as vices are legally prohibited, supply responses change people’s behavior. Imagine there’s a supplier of illegal marijuana. Government steps up its efforts to stop its supply by increasing interdiction efforts, along with stiffer fines and prison sentences. Which is easier to conceal and transport—a million dollars’ worth of marijuana or a million dollars’ worth of cocaine? Obviously, it’s cocaine because there is far less bulk per dollar of value. Thus one effect of prohibition is the tendency toward increased sales and use of more-concentrated forms of drugs that can include products such as crack cocaine, ice, and meth.

Another impact of prohibition is on prices. To supply the addiction needs of those who are not able to pay the prohibition-induced higher prices of cocaine, producers will seek to find cheaper substitutes such as crack. This is borne out by the fact that crack is far more popular among poorer addicts than wealthier ones.

Invitation to Make a Killing

Illegality, high prices, and high profits, coupled with greater government drug-interdiction efforts, also encourage entry by suppliers who are more ruthless and innovative, and who have a lower regard for civility and the law. Panty-waisted, petty, and otherwise law-abiding practitioners are ousted. In addition, since the courts are unavailable to enforce agreements made among traders, as in the case of legal transactions, disputes are more likely to be settled through violence.

Yet another supply response to prohibition, largely ignored in the drug debate, is the inevitable tendency toward corruption of public officials. Today’s drug trade, like the Prohibition liquor trade, could not flourish without official corruption. It’s not difficult to see how police officers, customs inspectors, and other law-enforcement officers earning $50,000, $60,000, or $70,000 a year could succumb to the temptation of $5,000 or $10,000 bribes to look the other way. No doubt there are elected officials who are also tempted by bribes. Even otherwise law-abiding nondrug-using parents are quieted by money and expensive gifts from their children who are involved in the drug trade.

The war on drugs restricts supply and raises prices. When one drug operation is busted up, another one emerges virtually overnight to take its place. When the DEA, FBI, and local police make a big drug bust, law-abiding citizens should not be jubilant. Instead, they should expect higher prices, leading to more ruthlessness among drug users and buyers, more crime and corruption, and greater social costs.

Sanctioning Civil Rights Abuses

Another very dangerous cost of the war on drugs is that it has given respectability to the violation of our constitutional guarantees. Civil-forfeiture laws have been enacted, in clear violation of the Fifth Amendment, under which property can be confiscated without due process. A parent can have his automobile or house confiscated if, even when unbeknown to the parent, his offspring uses it in connection with drug use or sales. Anti-money-laundering laws violate our rights to privacy in our transactions. Murderers and rapists have been freed from crowded prisons to make room for nonviolent drug users.

From the demand, or personal use, side of the drug issue, what should we do? Lysander Spooner (1808–1887), one of the great American thinkers of the nineteenth century, suggested that while vices may be self-destructive or offensive, like all peaceful, voluntary activities they should remain outside the province of law and government. The vices Spooner referred to include “gluttony, drunkenness, prostitution, gambling, prize-fighting, tobacco-chewing, smoking and snuffing, opium-eating, corset-wearing, idleness, waste of property, avarice, hypocrisy, etc., etc.” Spooner added that if practitioners of these and other vices cannot be reformed voluntarily, if they go on to what other men call destruction, then they must be permitted to do so. He reminds us that the maxim of law is there can be no crime without criminal intent to invade the property or person of another.

People practice vices for what they perceive as their own happiness—not to violate the rights of another. In a free society people have the right to destroy their own lives but not those of others. When government coercion is used to promote virtue, there cannot be liberty. However, there is conduct that people might engage in under the influence of narcotics, such as impaired driving, robbery and burglary to fund their habit, and other acts that threaten the rights of others. Such acts are already criminal and should be punished.

We Americans have to ask ourselves if there is a better way to deal with the drug problem. I think there is. We need to focus more on the demand side of the drug problem. After all, most people don’t use marijuana, cocaine, and heroin. The reason they don’t has nothing to do with its price or the fact it’s illegal. Their decision has much more to do with their values and common sense. Rather than near-exclusive reliance on the law and government, I believe greater and longer-lasting gains can be made through civil society, where we can cajole, admonish, and teach people about the destructive effects of narcotics—and ostracize them if necessary.

It is foolhardy to have a public policy that forces people hell-bent on destroying their own lives to become violent criminals and destroy the lives of innocents in the process. It is also foolhardy for society to create circumstances in which official integrity is compromised and our constitutional guarantees are violated.

Paul Krugman and Chris Matthews, among other Progressives, are apoplectic because two senators of the minority party held up votes on Obama appointments in order to win pork-barrel projects for their states. This reminds me of Captain Renault’s reaction on learning that people gamble in Rick’s gin joint.

Krugman acknowledges that this sort of thing is old hat, but he is upset that it’s become more common. Perhaps, but it was only a matter of time before the device known as the “hold” would be more widely used. The stakes have gotten higher over the years.

Nasty Fights over the Honey Pot

How in the world could the central government commandeer $3.8 trillion–about a third of it borrowed–without reelection-hungry politicians being willing to walk over their mothers to get at that honey pot? Government is a transfer machine. Do you expect everyone to pretend that it isn’t?

When someone insists he can square the circle, you know you’re looking at a demagogue or a zealot. Same goes for someone who insists you can have a government that exercises plenary power over our lives without generating politics in the most unsavory sense of the word. Today we have two broad political divisions that hold that power and agree on fundamentals. Sure, they have public disagreements over how power (and wealth) should be distributed at the margin between the bureaucrats and the significant interests in the “private sector.” There is no way we can have that sort of system without those disagreements at least occasionally turning bitter.

I suspect that people like Krugman and Matthews know you can’t have big government without nasty politics, but they want to have it otherwise so badly that they feign shock when a senator holds up a vote until he gets a government contract and some superfluous building for his state. Of course, they might genuinely get angry when the faction they dislike behaves this way. However, when their side indulges in such strategies, it’s good Progressive politics. Objectivity is not their strong suit.

People of this ilk showed the same shock when the Supreme Court ruled recently that corporations (for- and nonprofit) and unions cannot be barred from spending political money during election campaigns. (McCain-Feingold outlawed so-called independent expenditures by all incorporated entities, except media companies, 30 days before a primary and 60 days before a general election. The Court said that is unconstitutional.) Progressives are appalled that such entities would try to influence the selection of officeholders in a government that holds life-and-death power over so many aspects of life. Did they think people with interests at stake would just stand by passively? Apparently so, and when the affected organizations refused to do so, the “good-government” crowd opted for gagging them, showing unmistakably how devoted that crowd is to free speech when the chips are down. Now they (and Barack Obama) blast the five Supreme Court justices for saying the gag is unconstitutional.

One need not love big corporations or big unions–both of which derive significant power from the State–to be offended by this restriction on freedom of speech. Remember the slippery slope! Whose speech might next be deemed too influential and in need of restricting? Besides, it’s not as though corporations and unions have no other ways to influence politicians and policies. I suspect that spending during campaigns is the weakest method of influencing the government. Voters still have to go into the booth and mark the “right” ballots, and politicians can’t risk alienating the median voter. As Tyler Cowen pointed out in the New York Times:

For all the anecdotal evidence, it’s hard to show statistically that money has a large and systematic influence on political outcomes. That is partly because politicians cannot stray too far from public opinion. (In part, it is also because interest groups get their way on many issues by supplying an understaffed Congress with ideas and intellectual resources, not by running ads or making donations.) It is quite possible that the court’s decision won’t affect election results very much.

So memo to Krugman, Matthews, et al.: You can’t have the kind of government you want without people inside and outside the halls going to great lengths to get their hands on that power. You know it, and so does anyone who spends five minutes thinking it through. Enough whining already.

Of course, what I just said suggests a way to end the power brokering, logrolling, and influence peddling:

Don’t let government commandeer our resources and manage our lives!

If there were no privileges to sell, there would be no privileges to buy. If I may adapt something musical satirist Tom Lehrer sang about the New Math years ago, “It’s so simple, so very simple, that only a child can understand it.”

I’m sure the Progressives are saying right about now, “Gosh, why didn’t we think of that?”

Progressive Coercion

Well, no, not really. They apparently would rather sacrifice anything to preserve the machinery of social engineering, which they need to realize their grand designs. They rhapsodize about democracy, but their words betray their true preferences. Why else would they insist that Obamacare be passed despite the opposition of a majority of the public? Why do they smugly insist that the only reason the people are against it is that Obama did not explain the 2,700-page plan clearly enough in dozens of speeches?

When will the Progressives realize that although they claim to despise corporate influence in government (check out who supports Obamacare), it is their Progressive ancestors who helped forge the implements of power to which the corporate world has ready access.

This government doesn’t merely breed corruption. It is corruption.

The most popular big-government programs–like Social Security, Medicare, and Medicaid–are going broke. These entitlements account for more than half of annual federal spending. In 2009, spending on all federal entitlements exceeded all federal tax revenue. As Cato Institute economist Richard W. Rahn explained, this means “virtually all of the other government spending programs, including defense and interest payments on the debt, will be funded by more borrowing.”

The escalation of spending for the entitlements is politically unstoppable because they’re defended by powerful interest groups that benefit from them. These and other federal programs–guarantees for home mortgages, commercial bank deposits, credit union deposits, veterans benefits, import/export deals, student loans, and private and government-employee pension benefits–involve financial commitments that currently exceed $70 trillion. In addition, more than $12 trillion in U.S. Treasury debt is outstanding, much of which is held by Chinese and other foreign investors. Incredibly, President Barack Obama’s administration risked a trade war with China by blocking Chinese imports, a political payoff for labor unions that had supported Obama during the 2008 presidential campaign, even though such action could complicate U.S. efforts to continue selling its debt.

For years, the government has spent more money than it has had. It’s constantly going deeper into debt.

In spending all this money, members of Congress commonly don’t read the bills they vote on. They keep passing more laws even though they have limited understanding of the effects of previous laws. Many laws are so complicated–over a thousand pages–that government officials themselves are among the most notorious violators. Government is bigger than anything else in our society and far more complicated than the derivatives and other toxic bank assets nobody knew how to value after the financial meltdown of 2008. Managing the federal government well is beyond the capability of any human being. It’s beyond the capability of the 535 members of Congress. It’s too big to succeed.

You Need a Form for That Form

One thing the federal government does as it gets bigger is require people to fill out more bureaucratic forms. In 1978 Congress passed the Government Paperwork Elimination Act, when it was estimated that people spent almost a billion hours a year filling out federal forms. Not surprisingly, a new federal bureaucracy–the General Services Administration’s Forms Policy and Management Team–was established just to deal with federal forms. Creating, changing, or eliminating a form requires that somebody fill out a two-page SF152 form with 27 questions. For those who might have difficulty filling out the form, the government produced a 23-page booklet explaining how. Unfortunately, things don’t seem to have been going well with the Forms Policy and Management Team. Now it’s estimated that people spend about ten billion hours a year filling out some 8,000 different federal forms. Both political parties are responsible for the colossal waste of time that could have been used to create more growth and jobs. Republicans reportedly have excelled at multiplying the number of defense-related forms. Democrats have excelled at forms related to social spending. Obama’s so-called stimulus bill authorized bureaucrats to churn out still more forms in an effort to determine where all the money went.

Taxing Forms

Perhaps the most aggravating forms have to do with taxes. The tax code has become hideously complex, a consequence of trying to extract trillions of dollars for social and military spending and trying to do good through thousands of different tax breaks. Lindy L. Paull, who served as chief of staff for the Joint Committee on Taxation, told the Senate Finance Committee: “The Internal Revenue Code consists of nearly 1.4 million words and includes 693 separate sections that impact individual taxpayers. The Treasury Department has issued some 20,000 pages of regulations containing over 8 million words. Individual taxpayers who file an annual Form 1040 must deal with its 79 lines, 144 pages of instructions and 11 schedules totaling 443 lines plus instructions to go with them. There are 19 separate worksheets embedded in the Form 1040 instructions, and the possibility of filing numerous other forms, depending on the circumstances.”

The U.S. Treasury has estimated that individuals, employers, and nonprofits spend more than six billion hours a year dealing with their taxes. This is the equivalent of full-time work by 2.8 million people–more people than are employed in the auto-manufacturing, petroleum-refining, electric-power generation, computer-hardware, computer-software, pharmaceutical, medical-devices, steel, and chemical industries combined. In addition to the cost of this time is the money spent for tax-planning and tax-accounting services, not counting the taxes themselves. All this is a stupendous waste of resources that would be better spent adding value to the economy.

Bloated Mass of Contradictions

Big government is a bloated mass of contradictions that often have unexpected, harmful consequences. Politicians scold citizens for consuming too much sugar, but the government provides subsidies for producing high-fructose corn syrup that’s widely used in sodas, cookies, and other sweets. Government subsidizes farmers for growing crops and no crops at all. Government subsidizes homeownership and restricts the number of homes that can be built. Officials criticize business executives who take on too much debt, but government encourages debt by providing tax deductions for interest (but not for equity capital), and of course the government itself is deeper in debt than anybody else. Officials complain that companies invest so much money overseas, but the government imposes a 35 percent tax on earnings brought back to the United States. Officials bemoan our dependence on foreign oil, while restricting U.S. oil drilling. Businesses can be prosecuted for “predatory price cutting” if they charge too little, “price gouging” if they charge too much, and “price fixing” if they charge the same as their competitors. By providing billions of dollars of federal aid for attending college, the government subsidizes demand, which has had the effect of making college more expensive and more difficult to pay for than it otherwise would be. Officials promote the virtues of small, high-mileage cars, and they enforce laws that make it almost impossible to produce such cars profitably in the United States. There are laws that make it more difficult for employers to hire people and laws that provide income for the unemployed. Officials encourage more couples to get married, but there are higher taxes on married people than on single people, providing incentives not to get married. Officials say they want more doctors while enforcing laws that limit the number of students who can enter medical schools. Government probably does more than anyone else to cause health care inflation by channeling about a trillion dollars a year into that sector, enabling people to bid up prices–and then the government tries to limit health care price increases with rationing, such as excluding more treatments from Medicare.

Mismanaging the Economy

Politicians expanded the power of the federal government to watch over the economy, but this has backfired badly. President Woodrow Wilson and Congress established the Federal Reserve System to prevent economic catastrophes. After inflating, misguided Fed officials tried to limit what they viewed as excesses of the Roaring Twenties stock market boom, but they overplayed their hand and triggered the 1929 crash. Not realizing what they had done, they presided over a severe monetary contraction, a major cause of the Great Depression. President Franklin D. Roosevelt signed the 1935 Banking Act to centralize power at the Fed, and officials there soon stumbled again, doing much to bring on the depression within a depression of 1938. In 2002 Ben S. Bernanke, a governor of the Federal Reserve Board before becoming chairman, acknowledged the Fed’s role in the Great Depression: “We did it. We’re very sorry. We won’t do it again.”

Unfortunately, in the early years of this decade, Fed officials stumbled yet again. They promoted an easy money policy that had the effect of subsidizing borrowing. The apparent intention was to make sure the economy fully recovered from the dot-com crash of 2000, but in the process they encouraged individuals and businesses to load up on debt, contributing to the bubble that burst in 2008.

Nobody has a crystal ball, certainly not Fed officials. They’re always trying to make sense of conflicting and incomplete data. Naturally they focus on avoiding the mistakes made the last time around. They can’t be sure what the effects of their policies will be in the future because it takes many months for them to play out through a large and complex economy. By the time Fed officials realize they have accelerated monetary expansion for too long, they’re tempted to hit the brakes too hard, jolting the economy with a more severe recession. Fed officials are human and bound to make errors. Their vast power means that when errors occur they will harm not just a city or state or region. They will harm the entire country and beyond. Disastrous errors are an unavoidable risk of big government, which turns out to be a principal source of instability in our economy.

Government: Bad Business

We have been told that only government has enough resources to make our economy work, but it’s too big to succeed. There’s long experience with government-run businesses that don’t work. They cannot control costs. When President Richard Nixon launched the government-run Amtrak passenger railroad system in 1970, he promised it would be profitable. Since then, however, it has hit taxpayers with 40 consecutive years (and counting) of losses amid soaring costs. Perhaps the most notorious government-run enterprise is the U.S. Postal Service, with its bloated workforce of some 800,000 unionized employees, declining mail volume, slower service, rising postal rates, annual losses in the billions, and some $15 billion of debt.

Defense Department weapons development programs often run more than 70 percent over budget. The Government Accountability Office reported that the Defense Department “is not receiving expected returns on its investment in weapon systems. Our analysis does not show any improvements in acquisition outcomes as programs continue to experience increased costs and delays.”

New York City’s government-run betting parlors gross nearly $1 billion a year but lose money and are more than $40 million in debt. Former Mayor Rudolph Giuliani called it “the world’s only bookie that loses money.” Burdened by costly contracts with the United Food and Commercial Workers Union, the Washington State Liquor Control Board has struggled to avoid losses by enforcing a state-run liquor store monopoly that extorts above-market prices for booze–”price-gouging,” as the practice is known. The Pennsylvania Liquor Control Board, which also enforces a state monopoly, has found it necessary to pay a consulting firm $173,000 to give its sullen employees smiling lessons.

Letting the Poachers Run the Zoo

One has to wonder about Obama as he struggles for more power over the economy, since the government has had trouble running a zoo. Donald K. Nichols, a pathologist at the National Zoological Park in Washington, reported that “because of incompetence in management and veterinary medicine, the operations of the National Zoo have been in such a state of disarray that it has led to poor animal care, animal suffering, and even animal deaths.”

Again and again hopes for big government turn out to be illusions. Reuters reported, “Within weeks of taking office, Obama rode to the rescue of homeowners resigned to financial ruin. Eight months later, the plan is plagued by delays and red tape. Just 17 percent of eligible borrowers have had their loans modified and monthly payments cut.” Obama promoted the Cash for Clunkers program that promised to repay auto dealers who gave consumers $4,500 for their trade-ins, but the federal government proved to be a notoriously slow payer, making it harder for cash-squeezed dealers to survive. Car sales dropped after the program ended.  And of course Obama promoted government-run health insurance for all, even though government-run medical facilities have been rocked by scandals. Veterans have had to wait as long as 200 days for an appointment with a Veterans Administration doctor. The Cleveland Plain Dealer reported that mortality for heart surgery patients was significantly higher at VA hospitals than at private hospitals. In 2009 the VA notified more than 11,000 veterans in Florida, Georgia, and Tennessee that they might have been exposed to HIV or hepatitis because of unsterilized equipment used for colonoscopies. Apparently VA employees sterilized equipment once a day rather than after each procedure! The result, of course, has been a flurry of lawsuits from veterans who claim they were infected by dirty equipment. In another scandal the VA agreed to a $20 million settlement because its sloppy security procedures jeopardized the confidentiality of medical records for more than 26 million veterans.

The more money government spends, the more it wastes. Politicians spend other people’s money, and it’s no secret that no one is as careful with other people’s money as he is with his own. Medicaid was started in 1965 to provide medical care for poor people, and spending skyrocketed. It reached $1 billion within a year, $6 billion in five years, and exceeds $300 billion annually now, but often the money doesn’t seem to buy very much. New York State has the most costly Medicaid program, yet a quarter of the most needy patients with chronic illnesses must wait a year to see a doctor, and two-thirds of these people end up in an emergency room. Overall, tens of billions of dollars of Medicaid funds are believed to be lost each year because of fraud that government employees seem unable or unwilling to stop. Some Medicaid doctors submit bills suggesting that they work as much as 24 hours a day. Medicaid has paid the cost of prescribing drugs for dead people. When fraud is discovered, government employees can’t be counted on to recover much. An Ohio Medicaid enforcement agency accepted $409 to settle a $500,000 overbilling case that involved an ambulance service. The same agency accepted a $155,000 settlement from speech therapy centers that had improperly billed Medicaid for $3.4 million. A Florida Medicaid enforcement agency didn’t know what happened to $133,000 in fines it claimed to have collected from various violators.

In an effort to enhance their prospects for reelection, members of Congress spend other people’s money on all kinds of crazy things that might appeal to key constituents. For instance: $1.7 million for research to find out why pigs smell; $800,000 for oyster rehabilitation in Mobile, Alabama; $7 million for Hawaiian sea turtles; $400,000 for the American Treasures Program, to save the Iowa home of cosmetics pioneer Carl Weeks; $238,000 for the Polynesian Voyaging Society; $1.9 million for the Pleasure Beach water taxi service; $4.8 million for various research projects about wood, including one on “the technology for laminated veneer lumber”; $1.35 million for the Obesity in the Military Research Program; $500,000 for the Sparta Teapot Museum; $1 million for the Waterfree Urinal Conservation Initiative; and $13.5 million for the International Fund for Ireland, which financed the World Toilet Summit. There are about 10,000 such wasteful projects in each federal budget. None of them serve the general interest.

Political power tends to corrupt. As long as trillions of dollars flow through the federal government every year, corruption will flow like the mighty Amazon. There are some 35,000 registered lobbyists in Washington, and the Washington Post reports that “half the former members of Congress are lobbyists.” Entertainment industry lobbyist Hilary Rosen spoke candidly about influence peddling: “When I gave $1,000 or $2,000 to a lawmaker, I wanted him to listen to my business proposition. And when I helped organize an event that raised $50,000 or $100,000, you bet I expected their vote. Why else do it? Members of Congress are consumed with raising money for their re-elections (or if they have a safe seat, they raise money to give to colleagues to increase their internal power). Anyone, including lobbyists, who lessens that anxiety, is considered a better friend than those who don’t. No lobbying reforms will change that fact.”

Duke Cunningham, a Republican congressman from California and a member of the Defense Appropriations Subcommittee, was among those who cashed in until he was caught. He accepted $2.3 million in bribes to help win more than $230 million of defense contracts for his pals.

Someday, perhaps sooner than we think, people will contemplate the wreckage of big government and wonder what ever gave anybody the idea that it could possibly be our salvation.

“If the parking meter deal put a bad taste in your mouth, try swallowing this: Chicago is considering leasing its water system to help fix the budget.” Privatization for efficiencies might be a good thing, but that’s not what this is about. Mayor Daley can’t stop paying off his cronies, so he’s selling off the city bit by bit rather than cut spending. Will we see similar deals at the Federal level soon?

There’s a dark side to privatization and Chicago has proof. Sometimes the private company buying up the utility is a political crony. And privatization hides operations of the utility where Freedom of Information Act requests do not apply. Governor Quinn uses his personal cell phone for state business. This is an example of micro-privatization that saves the state money (not much grant you) but it also makes his phone records a private matter that cannot be scrutinized by the public. In the case of the water department, which is know as the most political department, perhaps the city feels it can avoid patronage scandals if hiring decisions are no longer a public concern.I’m not saying all privatization is cynical … but when corrupt people privatize government services it tends to be for corrupt reasons. Keep in mind that the water department is one of the most corrupt of chicago’s many corrupt city agencies.  I won’t cross my fingers for an open and transparent bidding process.