1913: The Turning Point

In 1913, Woodrow Wilson was the newly elected president.  Wilson and his fellow progressives scorned the Constitution and the Declaration.  They moved swiftly to replace the Founders' republic with a new regime.

There is widespread agreement that Wilson did not always show good judgment – for example, in his blunders in international relations – but in the project of overturning the Founding, he and the movement he led selected their targets shrewdly.  By the time he left office, the American republic was, as they say, history.  The fundamentals of the new regime were in place, and the expansion of government under FDR, LBJ, and Obama was made easy, perhaps even inevitable.

Nineteen-thirteen gave us the 16th and 17th Amendments to the Constitution.  That year also saw the creation of the Federal Reserve.  This burst of changes marks the effective beginning of the Progressive Era in American politics, the era in which we now live.  Wilson was to do much more that would once have been considered out of bounds, but these three changes were enough to change everything.  In 1913, the fundamental agreement the Founders made with the American people about the relation of the states and the federal government was broken. 

Here is the Founders' original bargain, stated by James Madison in Federalist 45:

The powers delegated by the proposed Constitution to the federal government are few and defined.  Those which are to remain in the State governments are numerous and indefinite.  The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce[.] ... The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.

It is important to remember that when we speak of the ratification of the Constitution, this is what was ratified.  But this is not the government we now have.  Today's central government is not the federal government of the original Constitution.  For example, thanks to Obamacare, the central government can penalize you if you do not purchase a health insurance policy approved by the central government.  Also, bizarrely, Obamacare federalized loans for college students – by actually putting the central government in the student loan business!  These are not "external objects, as war, peace, negotiation, and foreign commerce."

Clearly, the bargain, honorably entered into by the Founders' generation, was broken.  It was broken by the 17th Amendment, which instituted the direct election of U.S. senators.  That amendment struck directly at the heart of the Founders' design.  According to the original Constitution, senators were chosen by the state legislators.  Unlike the members of the House, who represent the people of their district, the senators had a special responsibility to represent their states in the deliberations having to do with the those "few and defined" powers the Constitution transferred from the states to the federal government.  That is why the states with small populations and the states with larger populations got the same number of senators and the same number of votes in the Senate.  It is also why the Constitution gives the Senate power over treaties and over the appointment of the senior officials of the executive, those whose responsibilities include "war, peace, negotiation, and foreign commerce."  The 17th Amendment eliminated the fundamental electoral guarantee of the Founders' vision of a federal government with limited powers.

The system we have today bypasses the state legislatures.  The consequences have been many and profound.  Probably the most obvious has been the inevitable erosion of the independence of the states and of their ability to counterbalance federal power.  The Senate was a barrier to the passage of federal laws infringing on the powers reserved to state governments, but senators abandoned that responsibility under the incentives of the new system of election.  Because the states no longer have a powerful standing body representing their interests within the central government, the power of the central government has rapidly grown at the expense of the states.  The states increasingly are relegated to functioning as administrative units of today's gargantuan central government.  The Tenth Amendment has become in our time a dead letter:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Instead of retaining many of their powers and responsibilities, and surrendering only a limited number of their powers to the federal government, as the Framers intended, the states are today greatly diminished politically.  They are increasingly entangled in administering programs and carrying out mandates of the central government.  These mandates are often not even funded by the central government; the costs of unfunded mandates falls on the states. The many new departments that have accumulated in Washington during the Progressive Era, such as HUD (Housing and Urban Development) and HHS (Health and Human Services), involve themselves in, and even direct, functions that, according to the Constitution as drafted by the Founders, are outside the scope of the federal government. 

The result – a central government that can fine a farmer millions of dollars for plowing on his own land across a  "vernal pool" (standing water in the springtime) without its permission – is obvious to us all, although this new regime's origin in the 17th Amendment generally goes unnoticed.

Then there is the 16th Amendment.  It introduced the progressive income tax, one of the most prominent jewels in the progressive crown.  Changing the federal government's revenue base from tariffs, which are largely self-limiting, removed a fundamental limit to the growth of federal power.  In 1910, the government's revenue looked much like how it did in the time of George Washington: about 3 percent of GDP, earned primarily through tariffs.  The 16th Amendment overthrew the limited government of the Founders by opening the door to the unlimited revenue needed to finance the central government's unending expansion into every area of American life.

It also corrupted the federal government.  The federal government once had a reputation for being fairly free of corruption.  In part, this was simply because it was limited government.  The bigger it got and the more areas of life and the economy it entered into, the greater were the opportunities for corruption.  Today, the fantastic corruption of the Clintons is only the tip of the iceberg.  Their brazenness tells you what you already know: Washington is corrupt on a scale undreamed of by the Founders. 

As it happens, this is precisely the point where the 16th and the 17th Amendments shake hands.  You can understand this better if you ask yourself why the federal tax code in 2016 swelled to 75,000 pages.  Those pages are filled with favors and special deals.  As a result of the 17th Amendment, senators must chase after individual voters just as their colleagues in the House have always done – but in all but the few least populated states, they have to chase millions more voters.  That costs money.  Instead of watching out for their states' interests, as was originally intended, senators now must keep their focus on raising truly fabulous sums to run for office under the new system.  This is where lobbyists come into the picture.  They have clients with money who need favors and special deals, and senators need money, and lots of it.

Also in the banner year of 1913, Woodrow Wilson signed the Federal Reserve Act, creating a central bank.  The progressives proposed the central bank as a government solution to bank panics.  A bank panic occurs when too many depositors want their money at the same time.  Banks had always managed bank panics among themselves, sometimes heroically, not always perfectly.  The central bank was going to change this by providing a government solution.  The Fed failed at the first crisis, and failed spectacularly.  What it did then and what it did not do in that crisis seem inexplicable.  You or I could have done a better job.  In any case, bungling by the Federal Reserve helped to turn an economic downturn into the Great Depression. 

The Federal Reserve Act did accomplish something: it opened the door to the complete socialization of America's currency.  Instead of providing liquidity to sound banks during a panic as the legislation provided for, the Fed has taken control of the currency, an enormous, essentially unchecked, and unconstitutional power over your wealth.  And although it failed spectacularly at the job it was supposed to do, the Federal Reserve did succeed in debauching the American dollar.  The value of the dollar has collapsed; one 1910 dollar would be worth $24.89 in 2017.  According to my calculations, that means your dollar today is worth about 4 cents compared to the days when people used to say "sound as the dollar." 

The Fed has been using excess money creation as a hidden way of collecting taxes for the central government.  The total amount of wealth the Fed has confiscated in this way is breathtaking. 

John Maynard Keynes did a great deal of harm, but he did say at least one true thing:

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.

The Fed has actually been functioning as a kind of accomplice of the IRS.  Today, the Federal Reserve can create money without even having to bother printing it; now the Fed can create any amount by simply entering a number in a computer.  Talk about taking the limits off government spending!

It is perfectly obvious that we are far down the path to a new kind of tyranny by way of endless bureaucratic regulation and confiscation.  If we are to recover and secure our liberty, much must be done, and much must be undone.  We cannot succeed unless we carefully remove these three pillars of the Progressive State. 

Robert Curry serves on the Board of Directors of the Claremont Institute and on the Board of Distinguished Advisers of the Ronald Reagan Center for Freedom and Understanding.  He is the author of Common Sense Nation: Unlocking the Forgotten Power of the American Idea from Encounter Books.  You can preview the book here.

In 1913, Woodrow Wilson was the newly elected president.  Wilson and his fellow progressives scorned the Constitution and the Declaration.  They moved swiftly to replace the Founders' republic with a new regime.

There is widespread agreement that Wilson did not always show good judgment – for example, in his blunders in international relations – but in the project of overturning the Founding, he and the movement he led selected their targets shrewdly.  By the time he left office, the American republic was, as they say, history.  The fundamentals of the new regime were in place, and the expansion of government under FDR, LBJ, and Obama was made easy, perhaps even inevitable.

Nineteen-thirteen gave us the 16th and 17th Amendments to the Constitution.  That year also saw the creation of the Federal Reserve.  This burst of changes marks the effective beginning of the Progressive Era in American politics, the era in which we now live.  Wilson was to do much more that would once have been considered out of bounds, but these three changes were enough to change everything.  In 1913, the fundamental agreement the Founders made with the American people about the relation of the states and the federal government was broken. 

Here is the Founders' original bargain, stated by James Madison in Federalist 45:

The powers delegated by the proposed Constitution to the federal government are few and defined.  Those which are to remain in the State governments are numerous and indefinite.  The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce[.] ... The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.

It is important to remember that when we speak of the ratification of the Constitution, this is what was ratified.  But this is not the government we now have.  Today's central government is not the federal government of the original Constitution.  For example, thanks to Obamacare, the central government can penalize you if you do not purchase a health insurance policy approved by the central government.  Also, bizarrely, Obamacare federalized loans for college students – by actually putting the central government in the student loan business!  These are not "external objects, as war, peace, negotiation, and foreign commerce."

Clearly, the bargain, honorably entered into by the Founders' generation, was broken.  It was broken by the 17th Amendment, which instituted the direct election of U.S. senators.  That amendment struck directly at the heart of the Founders' design.  According to the original Constitution, senators were chosen by the state legislators.  Unlike the members of the House, who represent the people of their district, the senators had a special responsibility to represent their states in the deliberations having to do with the those "few and defined" powers the Constitution transferred from the states to the federal government.  That is why the states with small populations and the states with larger populations got the same number of senators and the same number of votes in the Senate.  It is also why the Constitution gives the Senate power over treaties and over the appointment of the senior officials of the executive, those whose responsibilities include "war, peace, negotiation, and foreign commerce."  The 17th Amendment eliminated the fundamental electoral guarantee of the Founders' vision of a federal government with limited powers.

The system we have today bypasses the state legislatures.  The consequences have been many and profound.  Probably the most obvious has been the inevitable erosion of the independence of the states and of their ability to counterbalance federal power.  The Senate was a barrier to the passage of federal laws infringing on the powers reserved to state governments, but senators abandoned that responsibility under the incentives of the new system of election.  Because the states no longer have a powerful standing body representing their interests within the central government, the power of the central government has rapidly grown at the expense of the states.  The states increasingly are relegated to functioning as administrative units of today's gargantuan central government.  The Tenth Amendment has become in our time a dead letter:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Instead of retaining many of their powers and responsibilities, and surrendering only a limited number of their powers to the federal government, as the Framers intended, the states are today greatly diminished politically.  They are increasingly entangled in administering programs and carrying out mandates of the central government.  These mandates are often not even funded by the central government; the costs of unfunded mandates falls on the states. The many new departments that have accumulated in Washington during the Progressive Era, such as HUD (Housing and Urban Development) and HHS (Health and Human Services), involve themselves in, and even direct, functions that, according to the Constitution as drafted by the Founders, are outside the scope of the federal government. 

The result – a central government that can fine a farmer millions of dollars for plowing on his own land across a  "vernal pool" (standing water in the springtime) without its permission – is obvious to us all, although this new regime's origin in the 17th Amendment generally goes unnoticed.

Then there is the 16th Amendment.  It introduced the progressive income tax, one of the most prominent jewels in the progressive crown.  Changing the federal government's revenue base from tariffs, which are largely self-limiting, removed a fundamental limit to the growth of federal power.  In 1910, the government's revenue looked much like how it did in the time of George Washington: about 3 percent of GDP, earned primarily through tariffs.  The 16th Amendment overthrew the limited government of the Founders by opening the door to the unlimited revenue needed to finance the central government's unending expansion into every area of American life.

It also corrupted the federal government.  The federal government once had a reputation for being fairly free of corruption.  In part, this was simply because it was limited government.  The bigger it got and the more areas of life and the economy it entered into, the greater were the opportunities for corruption.  Today, the fantastic corruption of the Clintons is only the tip of the iceberg.  Their brazenness tells you what you already know: Washington is corrupt on a scale undreamed of by the Founders. 

As it happens, this is precisely the point where the 16th and the 17th Amendments shake hands.  You can understand this better if you ask yourself why the federal tax code in 2016 swelled to 75,000 pages.  Those pages are filled with favors and special deals.  As a result of the 17th Amendment, senators must chase after individual voters just as their colleagues in the House have always done – but in all but the few least populated states, they have to chase millions more voters.  That costs money.  Instead of watching out for their states' interests, as was originally intended, senators now must keep their focus on raising truly fabulous sums to run for office under the new system.  This is where lobbyists come into the picture.  They have clients with money who need favors and special deals, and senators need money, and lots of it.

Also in the banner year of 1913, Woodrow Wilson signed the Federal Reserve Act, creating a central bank.  The progressives proposed the central bank as a government solution to bank panics.  A bank panic occurs when too many depositors want their money at the same time.  Banks had always managed bank panics among themselves, sometimes heroically, not always perfectly.  The central bank was going to change this by providing a government solution.  The Fed failed at the first crisis, and failed spectacularly.  What it did then and what it did not do in that crisis seem inexplicable.  You or I could have done a better job.  In any case, bungling by the Federal Reserve helped to turn an economic downturn into the Great Depression. 

The Federal Reserve Act did accomplish something: it opened the door to the complete socialization of America's currency.  Instead of providing liquidity to sound banks during a panic as the legislation provided for, the Fed has taken control of the currency, an enormous, essentially unchecked, and unconstitutional power over your wealth.  And although it failed spectacularly at the job it was supposed to do, the Federal Reserve did succeed in debauching the American dollar.  The value of the dollar has collapsed; one 1910 dollar would be worth $24.89 in 2017.  According to my calculations, that means your dollar today is worth about 4 cents compared to the days when people used to say "sound as the dollar." 

The Fed has been using excess money creation as a hidden way of collecting taxes for the central government.  The total amount of wealth the Fed has confiscated in this way is breathtaking. 

John Maynard Keynes did a great deal of harm, but he did say at least one true thing:

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.

The Fed has actually been functioning as a kind of accomplice of the IRS.  Today, the Federal Reserve can create money without even having to bother printing it; now the Fed can create any amount by simply entering a number in a computer.  Talk about taking the limits off government spending!

It is perfectly obvious that we are far down the path to a new kind of tyranny by way of endless bureaucratic regulation and confiscation.  If we are to recover and secure our liberty, much must be done, and much must be undone.  We cannot succeed unless we carefully remove these three pillars of the Progressive State. 

Robert Curry serves on the Board of Directors of the Claremont Institute and on the Board of Distinguished Advisers of the Ronald Reagan Center for Freedom and Understanding.  He is the author of Common Sense Nation: Unlocking the Forgotten Power of the American Idea from Encounter Books.  You can preview the book here.

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