Saturday, February 14, 2026

The Senate and the Loss of Mixed Government

Introduction

Most serious writing advocating repeal of the 17th Amendment was published more than a decade ago. At the time, libertarian and constitutionalist circles showed modest interest in restoring Senate selection to state legislatures. That discussion never matured into a sustained reform effort, and it eventually faded.

The reason is not difficult to identify. Critics of the 17th Amendment have persuasively argued that direct election has nationalized the Senate and weakened federalism. What they have not convincingly shown is that repeal alone would solve the problems that led to the amendment’s adoption in 1913. Those problems included legislative deadlock, prolonged vacancies, and corruption in the selection process. Opponents of repeal continue to cite these failures as decisive objections, and they remain largely unanswered.

As a result, the debate has settled into a false choice. Defenders of the status quo accept a Senate that functions as a second House of Representatives, driven by national parties, donors, and media attention. Advocates of repeal argue for a return to legislative selection without fully explaining how the defects of the earlier system would be avoided. Neither position offers a structural solution capable of restoring the Senate’s original constitutional role.

This impasse explains why repeal efforts have stalled. The case against the 17th Amendment has been made repeatedly, but it has not displaced the arguments used to justify it in the first place. Any serious reform must therefore move beyond repeal and address the institutional design of the Senate itself.

Revisiting the 17th Amendment remains urgent. Federal authority has continued to centralize since its adoption, and state governments increasingly function as administrative arms of national policy. If the Senate is to serve as a meaningful check within the constitutional system, it must once again represent a distinct source of political authority. That requires not restoration alone, but redesign.

The question is not why this debate once mattered, but why it matters now. We are witnessing the devolution of the Senate before our eyes. Senators increasingly function as national political actors, responsive to party leadership, donors, and media incentives rather than to state governments as institutions. This is not an accident of personality or politics. It is the predictable result of a structural change.

The Senate and Mixed Government

The case against the 17th Amendment begins not with nostalgia, but with constitutional theory. The Founders designed the American republic as a mixed government. Liberty would be preserved not by elections alone, but by a collision of authorities drawn from different sources. Bicameralism was central to this design. The House and the Senate were meant to represent different interests, answer to different constituencies, and operate on different incentives. Only through this separation could each restrain the other.

The House of Representatives was built to reflect popular opinion. Its members were elected directly by the people, served short terms, and were expected to respond quickly to shifts in public sentiment. The Senate was designed to do the opposite. Senators were chosen by state legislatures to represent the states as political bodies within the federal system. This was not an accident of convenience. It was a deliberate attempt to anchor federal power in the institutional interests of the states themselves.

During the Constitutional Convention, several delegates warned that drawing both chambers from the same source would collapse this balance. Elbridge Gerry outlined the available options with clarity. Selection by the House would create dependency. Selection by the executive risked consolidating authority. Direct election would leave no effective check against majority impulses. If both chambers answered to the same electorate, they would reflect the same passions and interests, and the safeguards of bicameralism would be lost.

John Dickinson made the positive case for legislative selection. He argued that the Senate should arise from state governments in order to create a collision of authorities between state and national power. This arrangement would bind the federal government to the continued agency of the states, preserving federalism as a living structure rather than a parchment promise. Dickinson emphasized that the Senate was to be a point of connection, not separation, between the states and the national government.

This structure gave the Senate a distinct role. It was not merely a smaller House with longer terms. It was a chamber rooted in institutional representation rather than mass democracy. Senators had incentives to defend state prerogatives, resist national overreach, and slow legislation that threatened the balance between local and centralized authority. The result was a genuine check, not only on the House, but on the growth of federal power itself.

The 17th Amendment dismantled this arrangement. By shifting Senate elections to the same popular electorate that selects the House, it erased the institutional distinction between the two chambers. The Senate became nationalized. Its members now compete for party leadership, donor coalitions, and national media attention rather than accountability to state governments. The chamber still moves more slowly than the House, but it no longer represents a different source of authority.

Modern constitutional analysis has acknowledged this shift. The National Constitution Center notes that the amendment increased similarity between House and Senate constituencies and altered the original function of bicameralism. What was once a structural restraint on centralized power became a second venue for the same political pressures.

This loss helps explain why federal mandates now so easily override state priorities. When both chambers draw legitimacy from the same mass electorate, there is little incentive to defend the institutional role of the states. Federalism becomes rhetorical rather than operational.

For these reasons, simple repeal of the 17th Amendment is insufficient. The original problem was not merely who voted for senators, but how institutional diversity was preserved within the federal legislature. Any serious reform must restore that diversity. The Senate must once again arise from a different foundation than the House. Without that distinction, bicameralism cannot perform its intended function as a vital pillar of limited government.

A Proposed Amendment

The Senate of the United States shall be composed of three Senators from each state, chosen by the legislature thereof, for terms of six years, with a power reserved to a two-thirds majority of each legislature to recall its Senators, or any of them.

Except in trials of impeachment, each state shall cast one vote in the Senate, to be determined by the majority of its Senators. In the event the Senators fail to agree, the vote of that state shall not be counted. In trials of impeachment, each Senator shall have one vote.

Immediately after they shall be assembled in consequence of the first election, they shall be divided equally into three classes, each class composed of one member of each state delegation so that one third may be chosen every second year; and if vacancies happen by resignation or otherwise, during the recess of the legislature of any state, the executive thereof may make temporary appointments until the next meeting of the legislature, which shall then fill such vacancies.

Conclusion
institutions designed to restrain power

The 17th Amendment did more than alter the method of Senate selection. It collapsed the Senate into the same political universe as the House of Representatives. By drawing both chambers from the same source of authority, it weakened bicameralism, eroded mixed government, and removed an essential institutional check on centralization, a danger long recognized in classical theories of divided power.

Repeal alone cannot repair this damage. It would restore a flawed mechanism without addressing the deeper problem of how states are represented within the national legislature. A successful reform must restore the Senate’s federal character while correcting the defects that once justified reform in the first place.

The proposed amendment does exactly that. By restoring legislative selection, treating each state delegation as a unit, and requiring unified state voting, it reestablishes the Senate as a council of governments rather than a national popular assembly. Treating each state delegation as a single voting unit restores the Senate as a body of governments rather than individuals, while preserving internal deliberation within each state delegation. Staggered terms ensure that changes in state legislative composition are reflected gradually, allowing state interests to evolve over time without producing abrupt reversals in federal policy. Accountability is returned to state governments without recreating the paralysis of the late nineteenth century.

This structure also produces broader institutional benefits. It reduces the nationalization of Senate offices, weakens the incentive to politicize judicial appointments, and reinforces the separation of powers by reintroducing meaningful institutional conflict into federal lawmaking. These outcomes are not incidental. They are the direct result of restoring distinct sources of authority within the constitutional framework.

The choice, then, is not between repeal and retention. It is between continuing a system that has hollowed out federalism and adopting a reform that restores the Senate’s original function by fully realizing its role within a mixed and durable constitutional order. A constitutional republic requires more than popular elections. It requires institutions designed to restrain power by dividing it and by drawing authority from distinct political sources. This proposal offers a path toward restoring that balance. 

Saturday, January 17, 2026

Comprehensive Immigration Policy Proposal: Secure Mobility and Merit-Based Labor Authorization System

Core Principles

  • Prioritize temporary, circular labor mobility to meet U.S. economic needs without encouraging permanent settlement, chain migration, or de facto amnesty.
  • Enable high-volume, low-friction lawful work authorization through rule-based renewal rather than numerical caps.
  • Maximize upfront security, identity certainty, and compliance, while minimizing discretionary enforcement.
  • Enforce immigration law internally and institutionally, focusing on employers and individuals already in custody rather than street-level policing.
  • Replace post-1965 family-based permanent immigration with a labor-, skills-, and national-interest-based framework, restoring a merit-oriented system.
  • Ensure full tax compliance by integrating fiscal identifiers with lawful work authorization.
  • Preserve constitutional boundaries, federalism, and civil liberties through incentive-based cooperation, bright-line statutory rules, and explicit limits.

1. Unlimited Temporary Work Authorization

(Circular Labor Framework)

  • Non-resident foreign nationals may apply for temporary work authorization with no numerical cap.
  • Work authorization is granted for one-year periods and is renewable annually, subject to continued statutory eligibility and compliance.
  • Authorization permits lawful employment and repeated entry and exit, facilitating circular labor mobility while families and permanent residence remain abroad.
  • Temporary work authorization confers no right, expectation, or implied pathway to permanent residency, citizenship, or long-term domicile.

Employment Portability

  • Work authorization is sector-linked but portable among approved employers within designated industries, preventing coercive labor dependency.
  • Employer changes must be reported electronically but do not require reapplication where eligibility is maintained.

2. Renewal and Continued Eligibility

  • Annual renewal shall be approved administratively through an online portal or at designated ports of entry.
  • Renewal eligibility requires:
    • Verified lawful employment or sectoral qualification
    • Full federal and applicable state tax compliance using the assigned TIN
    • No disqualifying criminal activity
    • Verified biometric exit compliance for prior authorization periods
  • Congress may authorize indefinite annual renewal eligibility for individuals who continuously meet statutory criteria, without altering the temporary or non-immigrant character of the status.
  • Renewal eligibility does not reset, pause, or negate cumulative physical presence limits established under Section 7.

3. Wage Protection Safeguards

  • The Department of Labor shall conduct annual sectoral wage monitoring.
  • Wage benchmarks shall be tied to real median hourly earnings, adjusted for national CPI, in covered industries.
  • Automatic corrective mechanisms shall activate without discretionary action when real median hourly earnings in any covered 4-digit NAICS sector decline by more than 2.0% relative to the prior 36-month moving average, adjusted for national CPI.

Corrective mechanisms include:

  • Temporary throttling of new authorizations in affected sectors
  • Mandatory sector-specific wage floors
  • Suspension of new authorizations where persistent downward pressure is detected

All mechanisms are formula-driven and automatic to minimize politicization, litigation risk, and rent-seeking.


 4. Application and Vetting Process

  • Applications may be submitted online or at designated ports of entry and processing centers.
  • Required vetting includes:
    • Fingerprints
    • Facial recognition imaging
    • Comprehensive criminal, terrorism, fraud, and public health screening
  • Biometric data shall be retained securely for:
    • Identity verification
    • Re-entry validation
    • Employment authorization
    • Immigration enforcement related to compliance
  • DNA collection is not required for routine applicants and may be used only in narrowly defined circumstances involving identity disputes or serious criminal investigations, consistent with existing federal law.
  • Processing fees shall fully cover administrative and biometric costs.

5. Unified Biometric Work Authorization and Tax Identification Card

  • Approved individuals shall be issued a single, tamper-resistant federal identification card functioning as:
    • Proof of lawful work authorization
    • Secure re-entry credential
    • Employer verification document
    • Federal Taxpayer Identification Number (TIN)
  • The TIN shall be used for all federal (and applicable state) income and payroll tax withholding and reporting.
  • Use of Social Security Numbers is neither required nor permitted for temporary workers.

Data Access and Privacy Controls

  • Law enforcement access to biometric and identity data is limited to:
    • Warrant verification
    • Criminal investigations
    • Immigration enforcement related to authorization compliance
  • All access shall be logged, auditable, and subject to statutory oversight.

6. Employer Compliance and Enforcement

  • Mandatory employer participation in E-Verify, integrated with biometric photo verification.
  • Employers must use the assigned TIN for payroll reporting and tax withholding.
  • Severe civil and criminal penalties apply for:
    • Hiring unauthorized workers
    • Misclassification or off-the-books employment
    • Failure to properly withhold or remit taxes
  • Repeat or egregious violators may be debarred from participation in the temporary labor authorization system.

7. Interior Enforcement via Incentivized 287(g) Participation

  • Participation in 287(g) programs is voluntary for state and local jurisdictions.
  • No state or locality is required to participate, and non-participation shall not result in the withdrawal of baseline federal law enforcement funding.
  • No private right of action shall exist against any state, local government, or official for declining to participate.

Incentive-Based Federal Cooperation

Participating jurisdictions may qualify for:

  • Federal reimbursement for immigration status screening of individuals already in custody
  • Priority ICE custody transfers and expedited removal processing
  • Per-detainee payments exceeding average incarceration costs
  • Eligibility for supplemental detention, jail modernization, and public safety grants

Scope Limitation

  • Enforcement activities are limited strictly to individuals already in custody.
  • No authorization exists for street-level immigration enforcement, traffic stops, or community policing based on immigration status.

Voluntary Expedited Removal Option

  • Non-citizen detainees serving sentences of 60 days or less may voluntarily elect expedited removal in lieu of continued incarceration, with state approval.
  • Election requires:
    • ICE legal counsel
    • Independent interpretation
    • Written waiver of rights
  • Deportation shall occur directly, with no additional detention time.
  • Savings from avoided incarceration shall be redirected to enforcement support and processing capacity.

8. Hard Temporal Ceiling on Presence

  • Temporary work authorization is subject to an absolute cumulative physical presence cap of 8–10 years, calculated across all authorization periods.
  • Upon reaching the cap, the individual must depart the United States and complete a mandatory 3-year cooling-off period abroad before any subsequent application or renewal eligibility.
  • Time spent outside the United States does not count toward cumulative presence.
  • No renewal or reauthorization may be granted once the cap is reached.
  • No exceptions are permitted except narrowly defined humanitarian relief explicitly authorized by statute.

This provision prevents settlement-by-inertia while preserving long-term circular labor mobility.


9. Elimination of Family-Based Permanent Residency

  • Family preference categories for permanent residency are eliminated on a prospective basis.
  • All new permanent residency slots shall be allocated exclusively to:
    • Employment-based
    • Skills-based
    • National-interest-based categories
  • Narrow humanitarian exceptions are preserved for unmarried biological or legally adopted children under age 18 where:
    • The U.S. citizen parent has sole legal custody, or
    • The foreign parent is deceased or legally incapacitated
  • Existing family-based applications shall be grandfathered during a defined transition period.

10. Explicit Bar on Adjustment to Citizenship

  • Temporary work authorization shall not be convertible to permanent residency or citizenship.
  • Adjustment of status from temporary authorization is statutorily prohibited.
  • Repeated renewal, long-term participation, or cumulative years of authorized employment shall not create any legal equity, reliance interest, or constitutional claim to continued presence.
  • Any modification of this prohibition requires explicit congressional action.

Projected Outcomes and Reporting

Economic

  • Fill chronic labor shortages exceeding 8 million vacancies through lawful, circular labor mobility.
  • Increase GDP by an estimated $1–2 trillion over a decade.
  • Minimize wage suppression through portability, automatic safeguards, and sectoral throttling.

Fiscal

  • Capture federal income and payroll taxes on all authorized earnings through integrated TIN withholding.
  • Estimated $50–100 billion annually in currently unreported or underreported income brought into compliance.
  • Significant state and local savings from reduced incarceration and detention costs.

Security

  • Near-universal identity verification at entry, employment, re-entry, and departure.
  • All authorization holders shall be subject to biometric exit confirmation at air, land, and sea ports.
  • Failure to record exit within 30 days of authorization expiration triggers an automatic overstay flag and 5-year re-entry bar.
  • Overstay rates projected below 2%.

Implementation Costs and Budget Effects

  • Gross federal administrative costs estimated at $1.9–2.4 billion annually.
  • Reallocation of existing DHS, DOJ, and Treasury facilities, personnel, and IT systems expected to offset $0.9–1.3 billion annually.
  • Net new federal cost: approximately $1.0–1.5 billion per year, more than offset by tax compliance gains and reduced incarceration costs.

Optional Enhancements (Non-Essential)

  • Annual renewal fee of $100–200, projected to raise $2–4 billion annually, rendering the program revenue-positive.
  • Fast-track eligibility: after three consecutive on-time departures, eligible workers may receive 5-year multi-entry authorization with reduced paperwork.
  • Seasonal sub-category for agriculture and construction:
    • Up to 9 months per year
    • Automatic return requirement

Implementation and Oversight

  • Phased rollout beginning with agriculture, construction, and energy.
  • Program administration partially funded through application and renewal fees.
  • Annual public reporting on:
    • Wages
    • Tax compliance
    • Processing times
    • Overstay rates
    • Biometric exit compliance
    • Jurisdictional participation in incentive programs

Final Assessment

This framework reallocates existing immigration and enforcement spending toward high-yield, compliance-driven functions, establishing a high-volume, high-compliance labor mobility system that is economically productive, fiscally disciplined, constitutionally durable, and resistant to drift toward permanent settlement. 

Friday, December 26, 2025

Mefo Bills: A Historical Embodiment of Modern Monetary Theory Principles

Abstract

Mefo bills, a financial instrument employed by Nazi Germany from 1934 to 1938, have traditionally been understood as a clandestine mechanism for deficit spending to fund rearmament while evading Reichsbank lending limits, which were capped at 100 million Reichsmarks, and Versailles Treaty scrutiny. By April 1938, approximately 12 billion Reichsmarks were outstanding, rivaling the 19 billion in official bonds. These bills expanded the money supply through a state-guaranteed, interest-bearing (4%) quasi-currency that circulated among firms and was unconditionally rediscounted at the Reichsbank. Viewed through the lens of Modern Monetary Theory, Mefo bills reveal structural parallels: sovereign credit creation funding priorities beyond taxes, constrained by real resources rather than solvency concerns. This paper delineates their mechanics, highlights their functional equivalence to MMT principles, and discusses the economic implications of off-books credit expansion.

1. Introduction

Modern Monetary Theory posits that currency-issuing sovereigns face no financial constraint in funding government priorities. Spending creates money ex nihilo, while taxes primarily function to control inflation and shape demand. Deficits expand net private assets if productive resources are available. Mefo bills, devised by Reichsbank President Hjalmar Schacht, mirror this logic. A shell company, Metallurgische Forschungsgesellschaft m.b.H. (MEFO), capitalized at 1 million Reichsmarks by arms manufacturers such as Krupp, issued promissory notes to pay government contractors. These notes were backed by the Reich and rediscountable at the Reichsbank, effectively bypassing legal restrictions on direct government borrowing. By 1938, approximately 12 billion Reichsmarks in Mefo bills had been issued, representing a peak deficit impulse of roughly 20-25 percent of GDP. This policy drove unemployment from 25 percent to near-zero by 1938, without immediate consumer inflation due to strong output growth and price controls. Although not legal tender, Mefo bills were functionally monetary, as firms frequently discounted them for wages and supplier payments, injecting Reichsmarks into the broader economy.

2. Mefo Bills: Structure and Function

Armaments firms received six-month Mefo bills, extendable up to five years, for Reich orders. MEFO, a shell company, accepted the bills and paid 4 percent interest. Holders could trade the bills among firms, discount them at commercial banks for cash, or redeem them at the Reichsbank, which provided unconditional rediscounting. Key structural features included:

  • State-backed claims functioning as money: Mefo bills were negotiable like commercial paper, yet backed by the Reich, allowing them to circulate as quasi-currency in the industrial sector.

  • Financing beyond revenue: The 12 billion Reichsmarks issued between 1934 and 1938 vastly exceeded the 100 million Reichsmark legal lending limit. New bills could pay off maturing ones, effectively allowing indefinite rollovers.

  • Concealment: Mefo bills were off-books, hidden from public view and international scrutiny, until 1938. This allowed rapid rearmament without immediate inflationary effects.

  • Liquidity injection: Approximately half of the bills were discounted for wages and supplier payments, spreading purchasing power into the broader economy while delaying inflationary pressure.

The limitations on Mefo bills—sectoral focus and termination in 1938—were administrative and political decisions, not structural constraints.

3. Modern Monetary Theory: Conceptual Framework

Modern Monetary Theory argues that a sovereign government issuing its own currency is unconstrained by revenue. Spending occurs first, creating money; taxes follow to manage inflation and redistribute resources. Deficits expand private net financial assets when productive resources are available. Rollovers of obligations can be perpetual, provided the real economy absorbs spending. MMT highlights the role of inflation and real resource limits as the true constraints, rather than solvency.

4. Structural Equivalence of Mefo Bills and MMT

The functional parallels between Mefo bills and MMT principles are clear:

FeatureMefo BillsMMT (Sovereign Fiat)
MechanismState-backed promissory notes, Reichsbank-monetizedState-issued fiat currency (reserves, keystrokes)
PurposeFund government priorities (rearmament) beyond revenueFund government priorities beyond revenue
DurationRolled 6 months → 5 years; indefinite structurallyPerpetual rollovers possible via issuance or central bank operations
ConstraintsReal resources, output capacity, political toleranceReal resources, inflation; taxes control excess demand
Political leverageBypassed budget scrutiny and lending bansBudgets serve as policy instruments; no solvency constraint

Addressing Critiques

  • Deferred, conditional claims: Mefo bills were functionally monetary as they circulated in business networks and were redeemable at the Reichsbank.

  • Closed industrial network: While initially limited, discounting and wage payments injected funds broadly, indirectly reaching consumers.

  • Reichsbank dependence: Monetization through the Reichsbank ensured that the bills functioned as state-backed credit, effectively equivalent to central bank financing in MMT terms. Differences, such as opacity and sectoral focus, reflect historical contingency rather than structural limitation.

5. Implications

Viewing Mefo bills through an MMT lens demonstrates:

  1. Governments can operate beyond revenue constraints if sovereign credit is available.

  2. Technocratic decisions about capacity, as exemplified by Schacht’s administration, shape the real limits of such systems.

  3. Inflation serves as the primary economic check, rather than legal or political limits.

  4. Off-books, state-backed credit can sustain significant economic mobilization, with output and price stability maintained until real capacity is reached.

Mefo bills, if continued indefinitely, could have financed governance and militarization beyond traditional budgetary limits, constrained primarily by real resources and output.

6. Conclusion

Mefo bills embody the principles now formalized as Modern Monetary Theory. Though historically temporary, sector-specific, and politically constrained, they structurally demonstrate how state-issued credit can fund government priorities independently of taxation. Recognizing their equivalence to MMT enriches our understanding of economic history and highlights the enduring power of sovereign credit mechanics.

References (Selected)

Alesina, A., & Ardagna, S. (2010). Large Changes in Fiscal Policy. Tax Policy and the Economy.

Blanchard, O. (2019). Public Debt and Low Interest Rates. American Economic Review.

Borio, C. (2014). The Financial Cycle and Macroeconomics. BIS Quarterly Review.

Hein, E., & Truger, A. (2010). Modern Monetary Theory and Its Implications. Journal of Post-Keynesian Economics, 32(2), 301–328.

JordΓ , Γ’., Schularick, M., & Taylor, A. (2015). Leveraged Bubbles. Journal of Monetary Economics.

Kelton, S. (2020). The Deficit Myth. PublicAffairs.

North, D. (1990). Institutions, Institutional Change, and Economic Performance. Cambridge University Press.

Peacock, A., & Wiseman, J. (1961). The Growth of Public Expenditure. Princeton University Press.

Tooze, A. (2006). The Wages of Destruction: The Making and Breaking of the Nazi Economy. Penguin.

Wikipedia. “Mefo bills / MEFO” (citing primary sources, Nuremberg EC-436).

Haas, et al. (2024). “The Mefo Operation.” SSRN. 

Sovereign Credit, Affordability, And The Crisis Ratchet

 Abstract

This paper examines the institutional consequences of sovereign credit systems operating under conditions of broad discretionary authority. While often justified as tools of macroeconomic stabilization, sovereign credit mechanisms increasingly function as structural substitutes for explicit taxation, reshaping fiscal discipline, monetary credibility, and democratic accountability. Drawing on insights from Austrian economics, public choice theory, institutional economics, and related traditions, the paper argues that unconstrained sovereign credit generates predictable governance pathologies independent of ideological intent. Historical evidence and contemporary cases illustrate how crisis-driven expansions of fiscal and monetary discretion tend to persist beyond their originating emergencies, producing a ratchet effect that normalizes opacity and weakens constitutional constraints. The convergence of concerns across diverse economic schools suggests that the challenge posed by sovereign credit is not technical but institutional, rooted in the incentives created by discretionary power rather than in specific policy errors or partisan choices.


I. Introduction

Modern states increasingly rely on sovereign credit as a primary mechanism for financing public activity. Although often framed as a temporary response to extraordinary conditions, the use of discretionary fiscal and monetary expansion has become a normalized feature of governance in advanced economies. Official rhetoric frequently emphasizes restraint, sustainability, or eventual normalization, yet institutional practice reflects persistent expansion and consolidation of discretionary authority.

This paper argues that sovereign credit has evolved from an episodic policy tool into a structural feature of modern political economy. Its operation produces predictable effects on asset prices, affordability, inequality, and political incentives. These outcomes are not aberrations but the logical consequences of discretionary finance operating within democratic systems that face continual pressure to respond to perceived crises.

The analysis proceeds without attributing malign intent. Instead, it examines how institutional incentives, information asymmetries, and crisis dynamics interact to produce durable expansions of state capacity that are difficult to reverse.


II. Sovereign Credit as an Institutional Mechanism

Sovereign credit refers to the capacity of the state to mobilize resources through borrowing and monetary expansion without immediate taxation. In contemporary systems, this capacity is mediated through central banks, treasury issuance, and financial markets that treat sovereign obligations as foundational collateral.

Low interest rates and deep capital markets create the appearance of fiscal space, encouraging policymakers to treat credit expansion as a low-cost alternative to taxation. Research by Blanchard and Borio has shown that this environment weakens traditional debt constraints, particularly when monetary authorities implicitly or explicitly support government borrowing.

This pattern echoes earlier episodes, including wartime finance and the departures from gold convertibility in the 1930s. What distinguishes the post-1971 environment is the permanence of full discretion. Credit expansion no longer requires formal suspension of rules. It is embedded within the routine operations of the state.

Sovereign credit does not operate in isolation. It magnifies preexisting structural constraints by capitalizing them into asset prices. However, its effects are systemic, nationwide, and often international, particularly within a global financial system anchored to the United States dollar and reinforced by parallel practices among other major currency blocs, with variations in institutional design.


III. Affordability, Asset Inflation, and Distributional Effects

A central consequence of sustained sovereign credit expansion is the inflation of asset prices relative to incomes. Extensive empirical literature links prolonged credit growth to rising valuations in housing, equities, and other assets. JordΓ , Schularick, and Taylor demonstrate that credit-driven expansions disproportionately inflate asset markets, increasing financial fragility and inequality.

These dynamics contribute directly to affordability crises. Housing, education, and healthcare costs rise faster than wages, particularly for non-asset-holding households. The affordability crisis is primarily caused by market distortions resulting from economic intervention by government. Sovereign credit amplifies these distortions by lowering discount rates and increasing demand for scarce assets.

The resulting distributional effects align with the Cantillon effect identified by Austrian economists but are also recognized across multiple schools. Early recipients of newly created credit benefit disproportionately, while later recipients face higher prices without commensurate income gains. These outcomes persist regardless of stated policy goals.


IV. Crisis, Discretion, and the Ratchet Effect

Crises play a central role in legitimizing discretionary expansion. Few modern crises are organic or spontaneous. Most emerge from prior interventions that generate instability, fragility, or misallocation. When crises materialize, they are treated as exogenous shocks requiring immediate action.

The political response to crisis tends to follow a consistent pattern. Emergency measures are adopted, discretionary authority expands, and institutional boundaries blur. Once the crisis subsides, the expanded powers rarely fully retract. Peacock and Wiseman identified this ratchet effect in public expenditure, a phenomenon later extended by Higgs to broader institutional growth.

The 2020 to 2022 pandemic response provided a vivid illustration. Coordinated fiscal and monetary expansion on an unprecedented scale stabilized incomes and financial markets. It also contributed to subsequent asset and consumer price inflation and established new precedents for direct transfers and expansive lender-of-last-resort operations. These precedents now form part of the baseline expectations for future crises.

Retrenchment remains possible, but historically contingent and politically costly. Its rarity reflects institutional incentives rather than technical impossibility.


V. Converging Warnings Across Economic Traditions

Concerns regarding sovereign credit are not confined to any single school of thought.

Austrian economists emphasize malinvestment, distorted price signals, and intertemporal miscoordination arising from artificial credit conditions.

Chicago School economists focus on time inconsistency, credibility, and the erosion of policy rules under discretionary regimes.

Public choice theorists highlight incentive misalignment, rent-seeking, and the tendency for policymakers to externalize costs through inflation and debt.

Institutional economists emphasize path dependence, opacity, and the difficulty of reversing established practices once embedded in governance structures.

Post-Keynesian and Modern Monetary Theory scholars accurately describe the operational realities of sovereign finance, but often understate the political and distributive risks inherent in discretionary calibration.

The convergence of concerns across these traditions does not imply agreement on remedies, only on the risks inherent in unconstrained discretion.


VI. Opacity, Denial, and Democratic Tension

A defining feature of sovereign credit systems is opacity. The complexity of modern finance obscures the true incidence of costs, allowing policymakers to deny or minimize the consequences of credit expansion. Public statements frequently reject the existence of monetary financing or distributional effects, even as empirical evidence accumulates.

Opacity serves a stabilizing function by limiting immediate political backlash. It also undermines democratic accountability by preventing informed consent. Describing this stabilizing role is not a defense of it, but an acknowledgment of an unresolved contradiction within modern democratic governance.


VII. Political Alignment and the Paradox of Advocacy

A central paradox emerges from the political economy of sovereign credit. The constituencies most harmed by affordability crises and inequality often support political movements that favor expanded public provisioning. When explicit taxation proves insufficient or politically infeasible, sovereign credit becomes the residual funding mechanism.

This dynamic contributes to political instability. As affordability worsens, public demand for intervention intensifies. Each intervention reinforces reliance on discretionary finance, deepening the underlying structural pressures. The result is a self-reinforcing cycle rather than a corrective process.


VIII. Crisis as Opportunity Rather Than Necessity

Crises do not inherently demand intervention. They create opportunities for intervention. The repeated pattern of predictable outcomes challenges the claim that negative consequences are unintended. While motives need not be imputed, public choice analysis provides a framework for understanding why discretionary responses persist despite prior failures.

Past performance is a strong indicator of future performance. The recurrence of crisis-driven expansion suggests that sovereign credit is not merely a response to instability but a contributor to its reproduction.


IX. Conclusion

Sovereign credit has become the de facto funding mechanism of modern governance. Its persistence reflects institutional incentives, political pressures, and the difficulty of maintaining constraints under discretionary regimes. The system is effective in mobilizing resources and stabilizing markets in the short term. It is also corrosive to affordability, distributional equity, and constitutional accountability over time.

The central challenge identified in this paper is institutional rather than technical. The normalization of discretion, reinforced by crisis dynamics and opacity, weakens the credibility of commitments and the transparency required for democratic legitimacy. Collapse is not inevitable, but correction requires confronting the structural incentives that sustain the current equilibrium.


References (Selected)

Alesina, A., and Ardagna, S. Large Changes in Fiscal Policy. Tax Policy and the Economy, 2010.

Blanchard, O. Public Debt and Low Interest Rates. American Economic Review, 2019.

Borio, C. The Financial Cycle and Ma

Wednesday, July 16, 2025

Abolish The FBI

On July 24, 2024, former FBI Director Christopher Wray testified before the Judiciary Committee of the US House of Representatives. Some of the key themes of his testimony include the following:

  1. Threat Environment

    • Wray emphasized that the threat level is “elevated,” particularly from lone actors motivated by domestic ideologies or foreign influence.

    • He raised concerns about threats to public officials, law enforcement, and infrastructure.

  2. Political Violence

    • Stressed the FBI’s commitment to investigating and preventing acts of political violence from any ideological spectrum.

    • Highlighted domestic violent extremists (DVEs) as a growing concern.

  3. Election Security

    • Wray described ongoing work to counter foreign election interference and protect critical election infrastructure.

    • FBI is working with CISA, state officials, and social media companies.

  4. January 6 & Domestic Extremism

    • Defended the FBI’s investigations into January 6 participants as law-based and nonpartisan.

    • Rejected characterizations that the Bureau unfairly targets conservatives.

  5. FISA Abuse & Reform

    • Acknowledged past misuses of FISA (esp. in Crossfire Hurricane).

    • Claimed the Bureau has implemented over 40 corrective reforms.

  6. Weaponization Allegations

    • Denied that the FBI is "weaponized" against political opponents.

    • Argued it follows the law and does not open investigations based on political beliefs.

  7. Churches and Catholics

    • Responded to concerns over an FBI memo labeling some Catholics as potential extremist risks, calling it an isolated case from one field office.

  8. Social Media and Censorship

    • Claimed the FBI does not direct platforms to censor content, but rather flags foreign disinformation as part of national security duties.

Here is his complete testimony

There are notable discrepancies between Director Wray’s July 2024 testimony and public documentary evidence and watchdog reports. Here's a breakdown of key areas where tensions arise:

1. FISA Compliance & “Reforms”

  • What Wray said: He emphasized that the FBI has implemented over 40 corrective reforms since the Crossfire Hurricane FISA abuse, stressing improved compliance and discipline on Section 702 misuse. Rev+9Department of Justice+9YouTube+9Rev+8Federal Bureau of Investigation+8Default+8

  • Watcher evidence:

    • The DOJ Inspector General (IG) found 17 “basic and fundamental” errors or omissions in FISA applications, including misrepresentations regarding Carter Page’s status with the CIA — issues happening before Wray’s tenure, though the results were ongoing. Wikipedia+1Wikipedia+1

    • In a follow‑up DOJ self-review, they admitted one material error and over 200 non‑material ones across a sample of 29 applications. Though the DOJ claimed these didn't invalidate the warrants, the volume of mistakes raises concerns. Default

πŸ‘️ The discrepancy: Wray portrays broad corrective action, but oversight reports indicate deep-rooted systemic issues and continued errors—even if mostly minor.


2. Use of Informants on January 6

  • What Wray claimed: He stated emphatically that “we found no evidence” of FBI sources “stoking” the January 6 attack, and had not orchestrated events. Rev+2Congress.gov+2New York Post+2

  • What watchdogs reported:

    • The DOJ IG confirmed at least 26 FBI informants were present that day; some engaged in illegal acts like entering the Capitol, though none directed violence.

    • The IG also noted inaccurate reporting to Congress: no “canvassing” was done ahead of Jan. 6 despite claims to the contrary. New York Post

πŸ‘️ The nuance: Wray’s denial focuses on “orchestrated” wrongdoing, but it doesn't fully confront the fact that FBI informants were physically inside Capitol spaces and that internal coordination with Congress was misrepresented.


3. Political Neutrality & Censorship Claims

  • What Wray emphasized: He firmly denied that the FBI is “weaponized” or targets political opponents, describing investigations like January 6 as legally and ideologically neutral.

  • Counterpoints from whistleblowers:

    • Internal complaints—such as one memo calling pro-life Catholics “extremists”—suggest potential bias at local field offices. Wray described that as an isolated incident, though more whistleblowers allege broader politicization. New York PostRev

  • FISA politicization:

πŸ‘️ The tension: While Wray presents a clear narrative of neutrality and reform, oversight findings and whistleblower complaints suggest internal culture and systems may still be vulnerable to political influence.

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Bottom Line

Director Wray conveyed a strong message of reform, neutrality, and professionalism. Yet IG reports and internal evidence highlight persistent compliance gaps, inconsistent fact-reporting, and potential ideological infiltration at the field level. While Wray’s statements are largely accurate, they can gloss over ongoing operational and cultural challenges within the FBI’s internal systems.

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Director Wray, politicians and other defenders of the FBI have made arguments for the necessity of maintaining the FBI. Their primary arguments include the following:

National Security & Counterterrorism

  • The FBI is essential for preventing terrorist attacks (domestic and foreign).
  • It has unique tools for disrupting plots via surveillance, informants, and FISA.

Cybercrime & Counterintelligence
  • FBI claims to be the lead agency defending against foreign influence (China, Russia, Iran) and major cyber intrusions (e.g., ransomware, infrastructure hacks).
Public Corruption & Civil Rights
  • The Bureau often highlights its role in rooting out public corruption, hate crimes, and civil rights abuses (e.g., bad cops, voting interference, human trafficking).
Coordination Hub
  • It acts as a bridge between federal, state, and local law enforcement — especially through Joint Terrorism Task Forces (JTTFs), fusion centers, and training programs.
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Introduction

Most Americans rarely question the necessity of the Federal Bureau of Investigation. Yet the FBI’s history, documented extensively by investigative journalists such as James Bovard, reveals a pattern of abuse, politicization, and systemic failure. Remarkably, even the Bureau’s own defenders, like former Director Christopher Wray, inadvertently make the case against it. Wray’s July 2024 testimony before Congress, meant to reassure Americans of the FBI’s integrity and effectiveness, instead underscores why the Bureau is beyond reform. His own words provide a compelling foundation for abolition.

I. The Elevated Threat Environment: Failure, Not Justification

Wray emphasized that the threat environment is elevated, citing domestic extremism and foreign influence. Yet time and again, the FBI has failed to prevent the very attacks it was created to stop: 9/11, the Boston Marathon bombing, the Pulse nightclub shooting, and the Parkland school massacre, among others. In each case, the FBI had prior knowledge or warning signs but failed to act. An agency that demands deference because of threats it consistently fails to stop has no claim to necessity. Its failures are systemic, not incidental.

II. FISA Reforms: A Record of Recidivism

Wray touted 40+ reforms to the FBI’s FISA process, following repeated abuses in surveillance of American citizens. But this only proves how deeply flawed the Bureau is. The Department of Justice Inspector General found dozens of material errors and omissions, even after previous "reforms." The FBI's misuse of FISA against Carter Page wasn't an anomaly; it was emblematic of a bureaucracy that views legal boundaries as optional. How many rounds of reform are required before we admit the institution is unreformable?

III. Political Neutrality: Rhetoric vs. Reality

Wray claimed the Bureau investigates threats "without regard to ideology." Yet whistleblowers, internal memos, and investigative journalism reveal disproportionate scrutiny of political dissent on the right, including labeling Catholic traditionalists as potential extremists and targeting parents at school board meetings. The FBI’s selective enforcement of the law betrays its political tilt. Even if unintended, the structure of the Bureau makes ideological abuse inevitable.

IV. Historical Patterns of Abuse

James Bovard and others have documented the FBI’s long record of abuses, from COINTELPRO and the surveillance of Martin Luther King Jr., to the entrapment of dissidents, manipulation of media, and false prosecutions like those of Richard Jewell and Steven Hatfill. These are not anomalies; they are features of an agency with secret courts, unchecked surveillance powers, and a culture of impunity. Each decade promises reform. Each decade repeats the same crimes.

V. Bureaucratic Evasion and Arrogance

Wray’s testimony also reflects the FBI’s culture of insulation. When confronted with criticism, the Bureau deflects: accusations are conspiratorial, oversight is politicized, reform is always just around the corner. This bureaucratic arrogance is not incidental. It is the product of secrecy, lack of accountability, and legal exceptionalism.

VI. Decentralization, Not Consolidation

Defenders of the FBI argue it coordinates law enforcement and combats cyber threats. But these tasks can be handled by specialized or localized agencies without federal political entanglement. The U.S. Marshals, DHS, state and local law enforcement, and even private cybersecurity firms already fill these roles. Centralization has created unaccountable power. Decentralization restores transparency, responsiveness, and constitutional balance.

Conclusion

Director Wray’s testimony was meant to defend the Bureau. But if this is the best case the FBI can make for itself—a record of failure, politicization, and permanent reform cycles—then the problem is not who runs it. The problem is that it exists at all. Abolishing the FBI is not a partisan cause. It is a constitutional imperative rooted in history, prudence, and the preservation of liberty.

Problems with the FBI documented by James Bovard