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The Economics of Civil Government

As we begin our earthly journey into a new century, it is important to look over the last 100 years to see if we can learn anything about the social institution we call civil government.

  • Tom Rose,
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"The kings of the earth set themselves, and the rulers take counsel together, against the Lord, and against his anointed, saying, Let us break their bands asunder, and cast away their cords from us." — Psalm 2:2-3

As we begin our earthly journey into a new century, it is important to look over the last 100 years to see if we can learn anything about the social institution we call civil government.

James Jackson, in volume 7 of History of the American Nation, refers to an earlier age in which, "An American may through a long life, never be reminded of the federal government, except when he votes at presidential and congressional elections."1

How things have changed! Today, Americans cannot escape the ever-present rules and regulations that emanate mainly from Washington, D.C., but also from our state capitols and local city halls. These political edicts besiege and attack us during every hour of every day, as well as in every nook and cranny of our personal and business lives:

We cannot escape FDA-mandated "Truth in Labeling" requirements at the breakfast table, in the medicine cabinet, or at the supermarket.

Ninety percent of American school children are enrolled in tax-supported government schools where parents have no effective input about either policy or curriculum content. It is in these same tax-supported schools where millions of young children are regularly prescribed government-approved, mind-altering drugs which predispose young people to acts of violence. These violent acts, in turn, provide government leaders with fodder for removing people's right to own and bear arms.

Employers are minutely regulated regarding whom to hire or fire. They also must provide working conditions, wages, and benefits established by government regulations. Finally, business firms are used by federal, state, and local civil governments as non-paid tax-collection agents through payroll deductions.

Then there are even federal regulations which regulate how much water we are allowed per flush in our toilets! So much for the concept of structured federalism designed by our founding fathers!

How Did We Get Where We Are?
How did we come to lose the system of widely dispersed and carefully limited political powers intentionally designed by our founding fathers only to end up in the year 2000 with citizens being suffocated by a centralized fascistic government which voraciously eats up the economic substance of the people? For, until the very early 1900s-in spite of Lincoln's calculated destruction of the Constitution and the unconstitutional Reconstruction Acts after the war-the average American continued to enjoy a high degree of economic freedom. The strong arm of the federal government, as James Jackson indicated above, did not yet touch the ordinary citizen in his daily activities.

Fascistic regulation of business at the national level began with the Interstate Commerce Act in 1887, which established the Interstate Commerce Commission (ICC). The ICC grew out of a U.S. Supreme Court decision-Wabash, St. Louis and Pacific Railroad Company v Illinois (118 U.S. 557) 1886. This decision denied states the power of regulating interstate commerce and gave it to the federal government.

After 1900, bureaucratic intervention by the federal government into the lives of citizens gradually increased. Here is a selection of federal agencies with dates of establishment: Federal Drug Administration, which grew out of the Food and Drug Act (1906); the Federal Bureau of Investigation, which resulted from a presidential "executive order" (1908); The Federal Reserve Bank (1913); the Federal Trade Commission (1915); the Federal Power Commission (1920); the Federal Deposit Insurance Corporation (1933); the Federal Communications Commission (1934); and the Federal Housing Administration (1933). The intent of our founding fathers under the Articles of Confederation was that the power of the central government would not be able to touch citizens directly. The above listing shows how their intent was systematically undermined, thus culminating in the situation we have today.

How did we lose our original system of widely dispersed governmental powers and devolve into a centralized system of freedom-smothering fascism? The American people fell into the same trap that the Old Testament Israelites fell into when they asked for "a king to judge us like all the nations" (1 Sam. 8:5). In short, they looked to the civil authority to provide what God said He would provide-their economic sustenance. What started out as a moderate level of government intervention in citizens' business and personal lives in the early 1900s gradually accelerated into an ever-increasing army of government bureaucrats who regulate and tax. Each succeeding generation of Americans has been conditioned to look more and more to the civil authority for economic sustenance. This occurred in spite of our Lord's clear instructions that we are to ask our Father in heaven, "Give us this day our daily bread" (Mt. 6:11). The sad result of our spiritual rebellion has been a steady increase in both governmental regulation and oppressive tax levels: In 1900 no American citizen was directly taxed by the federal government; and less than five percent of his income was taxed away by civil government at all levels-local, state, and national. Today the Congress has power to tax at any rate that is politically expedient.

Today, all citizens are unconstitutionally subject to the never-properly-ratified Sixteenth Amendment (the Personal Income Tax). But only a relatively few members of the political elite-and certain millions of low-income citizens, many living in subsidized housing and receiving various government subsidies-can effectively escape the major brunt of the personal income tax. And this low-income group is carefully maintained and crassly manipulated by political power brokers to guarantee that there will always be an ignorant, but self-interested, "cheering section" to avidly support the constant drive for increasing government expenditures. Thus, the effective control of wealth and income is insidiously transferred from private hands to a controlling fascistic elite.

Economic Analysis
Let's analyze the working of civil government in order to understand it, for what man does not understand he cannot control. Then we will make Biblical applications to provide a godly orientation to our understanding; for good theology leads to wholesome political rule which, in turn, produces a beneficial economic climate in which free-market exchange can take place for the benefit of everyone. Let us remember an old French proverb: "Civil government is a growling dog to be fed, not a cow to be milked!"

First, we must recognize that the institution of civil government is coercive by its very nature. Civil rulers act by mandating, and they punish those who refuse to acquiesce to their mandates. I have often advised students, "It is absolutely impossible for the civil authority to accomplish anything voluntarily. Its very God-given nature is to be forceful. 'Do this, or else!' is its threat." Sometimes a student would state, "But, sir, I pay my taxes voluntarily!" My reply was always, "But what would happen if you 'voluntarily' decided not to pay your taxes?"

Recognizing the inherently coercive nature of civil government leads us to these questions: Since civil government is, by its very nature, a coercive agency of society, is there any limit to the level of taxation that morally can be imposed on citizens? Also, are there any restrictions as to what tax monies should be used for?

From an economic viewpoint, we find that, when tax levels start exceeding 15 to 20 percent of income or on the price of goods and services being exchanged, people start seeking ways to avoid paying taxes. Thus, black markets spontaneously appear. From a Biblical viewpoint, we see that God requires only a tithe (one tenth) of our incomes. When the civil authority starts mandating as much or more than ten percent of a person's income, does not the civil authority place itself equal to or higher than God? Only a "theologically challenged" citizenry (to coin a new "politically correct" term) would succumb to such tyranny instead of rising up in open rebellion!

In short, then, the answers to the above questions are:

1) Yes, there is a moral limit that a free and godly people should place on the taxing power of civil rulers. When the personal income tax was unconstitutionally placed on citizens in 1913, the vast majority of citizens were exempt from paying taxes, else they would never have permitted such a privacy-invading tax. The top tax rate was six-percent on income in excess of $500,000, which would be equivalent to almost $9 million today! The general populace would never have endured a personal income tax, except they were seduced by the illusion that the tax would always be paid by the privileged wealthy class!

2) And, yes, there are both moral and constitutional restrictions as to what tax monies should be used for. The Constitution of these United States of America limits the federal government to using tax monies only for "the common Defence and general Welfare . . . ." But, during the 1930s administration of Franklin D. Roosevelt, the concept of "general welfare" was stretched unconstitutionally to finance a myriad of socialist schemes designed to redistribute the private wealth of citizens and to impose fascistic economic controls on business firms. Succeeding presidential administrations-Lyndon Johnson's "War on Poverty," for instance-continued to fund and expand massive government-sponsored schemes of "legalized theft," which are euphemistically called "transfer payments." Since World War II, tax monies have been increasingly distributed, not only domestically, but also internationally to hundreds of nations in the form of "foreign aid." This serves as an unending cornucopia for special interest groups that are closely tied to domestic and foreign civil governments. It also serves to foster the spread of socialist/fascist regimes worldwide.

Our Sinful World
We live in a world peopled by billions of sinful people who are alienated from God. These people-that's you and I!-are always ready to capture the reins of governmental power with an eye to lining their own pockets at the expense of others. The result is always some form of government-sponsored monopoly or other form of favoritism, such as government licensing of professions and businesses. For an historical example, consider the English East India Company which was formed in 1599 and chartered by Queen Elizabeth in 1600. Its grant of monopoly power greatly enriched the privileged few. A more modern instance can be seen in government licensing of certain professions (attorneys, medical doctors, dentists, various building trades, etc.). The goal is always tight control over the number of new entrants into a profession. The economic result is always fewer practitioners who thereby earn much higher incomes financed by lower income people. Government licensing is a superbly effective, but vicious, practice.

Our story of the symbiotic relation between the political sphere and the economic sphere, and of how political power is used to suppress voluntary free-market economic exchange, could go on and on. But readers would quickly become weary of reading such a sad tale.

Let us ask: Did God have an ideal model of economic exchange in mind when He created man, recognizing that God predestined man to live in a sinful world? I believe the answer to this question is a resounding YES! God instituted the social agency of civil government simply to maintain law and order so man could be free and self-responsible to his Creator (Gen. 1:26-28; Ex. 8:1; Dt. 17:14-20; Rom. 13:1-4; 1 Tim. 2:1-20).

If the civil authority were strictly limited to the ideal of applying the negative force of punishing those who harm or plunder others, then a godly freedom and self-responsibility among mankind would be maximized. Such a policy would unerringly lead toward an unending spiral of economic progress, prosperity, and world peace. Let us pray for this kind of reformation in civil government, which can come about only through our own personal reformation to God's Word.


1. Linda Bowles, "Government Has Mangled the Constitution," Conservative Chronicle, 24 November 1999, 19.

  • Tom Rose

Tom is a retired professor of economics, Grove City College, Pennsylvania. He is author of seven books and hundreds of articles dealing with economic and political issues. His articles have regularly appeared in The Christian Statesman, published by the National Reform Association, Pittsburgh, PA, and in many other publications. He and his wife, Ruth, raise registered Barzona cattle on a farm near Mercer, PA, where they also write and publish economic textbooks for use by Christian colleges, high schools, and home educators. Rose’s latest books are: Free Enterprise Economics in America and God, Gold and Civil Government.

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