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Ron Paul's Freedom Report
A publication of the Foundation for Rational Economics and Education
Volume 4, No. 8 OCTOBER 2000
An extraordinary event occurred in Washington during the final days of the
106th Congress, an event which did not receive comment in either the media
or the halls of Congress, save for this office. This event occurred because earlier
this year, it was "unthinkable" to some Members to take the necessary steps
to prevent it. It occurred quietly, during a flurry of last-minute votes in these
final days of the 106th Congress. It occurred despite clear constitutional prohibitions,
and at the expense of our precious national sovereignty. For the first time in the history
of our country, Congress voted to change domestic laws because an international
body told us to do so. - Ron Paul
[Editor's note: In February, the World Trade Organization (WTO) ruled against the U.S. in a trade dispute. In that regard, Rep. Paul wrote: "I highly resent the notion that the World Trade Organization can dictate tax law to us.…The World Trade Organization has ruled against the U.S. because we have given a tax break to an overseas company. They have ruled against us that this tax break is a tax subsidy, language which annoys me to no end. They have given us until October 1 to get rid of that tax break for our corporations, so they are telling us, the U.S. Congress, what we have to do with tax law." H.R. 4986, the subject of Rep. Paul's statement of September 12, contains the changes to U.S. tax law that the Congress made in response to the ruling by the WTO's foreign bureaucrats.]
[TUESDAY, SEPTEMBER 12, 2000]
FSC Repeal and Extra-Territorial Income Exclusion Act of 2000
Mr. Speaker, H.R. 4986, brought up under suspension, deserves serious consideration by all Members.
There are three reasons to consider voting against this bill:
1. It perpetuates an international trade war.
2. This bill is brought to the floor as a consequence of a WTO ruling against the United States.
3. This bill gives more authority to the President to issue Executive Orders.
Although this legislation deals with taxes and technically actually lower taxes, the reason the bill has been brought up has little to do with taxes per se. To the best of my knowledge, there has been no American citizen making any request that this legislation be brought to the floor. It was requested by the President to keep us in good standing with the WTO.
The Trade Ministry for Global Government
We are now witnessing trade-war protectionism being administered by the World (Government) Trade Organization - the WTO. For two years now, we have been involved in an ongoing trade war with Europe, and this is just one more step in that fight. With this legislation, the U.S. Congress
capitulates to the demands of the WTO. The actual reason for this legislation is to answer back to the retaliation of the Europeans after they had a ruling against them in favor of the United States on meat and banana products. The WTO obviously spends more time managing trade wars than it does promoting free trade. This type of legislation demonstrates clearly the WTO is in charge of our trade policy.
The Wall Street Journal reported on 9/5/00, "After a breakdown of talks last week, a multi billion-dollar trade war is now about certain to erupt between the European union and the U.S. over export tax breaks for U.S. companies, and the first shot will likely be fired just weeks before the U.S. election."
Feudin' Like the Hatfields and the McCoys
Already, the European Trade Commissioner, Pascal Lamy, has rejected what we're attempting to do here today. What is expected is that the Europeans will quickly file a new suit with the WTO as soon as this legislation is passed. They will seek to retaliate against United States companies, and they have already started to draw up a list of those products on which they plan to place punitive tariffs.
The Europeans are expected to file suit against the United States in the WTO within 30 days of this legislation going into effect. This legislation will perpetuate the trade war and certainly support the policies that have created the chaos of the international trade negotiations as was witnessed in Seattle, Washington.
The trade war started two years ago when the United States obtained a favorable WTO ruling and complained that the Europeans refused to import American beef and bananas from American-owned companies. The WTO then, in its administration of the trade war, permitted the United States to put on punitive tariffs on over $300 million worth of products coming into the United States from Europe. This only generated more European anger, and Europe then objected by filing against the United States claiming the Foreign Sales Corporation-tax benefit of four billion dollars to our corporations was a subsidy.
On this issue, the WTO ruled against the United States both initially and on appeal. We have been given till October 1st to accommodate our laws to the demands of the WTO. That's the sole reason why this legislation is on the floor today.
H.R. 4986 will only anger the European Union and accelerate the trade war. Most likely, within two months, the WTO will give permission for the Europeans to place punitive tariffs on hundreds of millions of dollars of U.S. exports. These trade problems will only worsen if the world slips into a recession when protectionist sentiments are strongest. Also, since currency fluctuations by their very nature stimulate trade wars, this problem will continue with the very significant weakness of the EURO.
The United States is now rotating the goods that are to receive the 100 to 200 percent tariff in order to spread the pain throughout the various corporations in Europe in an effort to get them to put pressure on their governments to capitulate to allow American beef and bananas to enter their markets. So far the products that we have placed high tariffs on have not caused Europeans to cave in. The threat of putting high tariffs on cashmere wool is something that the British now are certainly unhappy with.
The Europeans are already well on their way to getting their own list ready to scare the American exporters once they get their permission in November.
Will the WTO Force the US. to Tax the Internet?
In addition to the danger of a recession and a continual problem with currency fluctuation, there are also other problems that will surely aggravate this growing trade war. The Europeans have already complained and have threatened to file suit in the WTO against the Americans for selling software products over the Internet. Europe taxes their Internet sales and [Europeans] are able to get their products much cheaper when bought from the United States, thus penalizing European countries. Since the goal is to manage things in a so-called equitable manner, the WTO very likely could rule against the United States and force a tax on our international Internet sales.
Congress has also been anxious to block the planned Voice Stream Communications purchase by Deutch Telekom, a German government-owned phone monopoly. We have not yet heard the last of this international trade fight.
The British also have refused to allow any additional American flights into London. In the old days, the British decided these problems, under the WTO the United States will surely file suit and try to get a favorable ruling in this area, thus ratcheting up the trade war.
Americans are especially unhappy with the French, who have refused to eliminate their farm subsidies - like we don't have any in this country.
The one group of Americans that seem to get little attention are those importers whose businesses depend on imports and thus get hit by huge tariffs. When 100- to 200-percent tariffs are placed on an imported product, this virtually puts these corporations out of business.
The one certain thing is that this process is not free trade; this is international managed trade by an international governmental body. The odds of coming up with fair trade or free trade under WTO are zero.
Unfortunately, even the language most commonly used in the Congress in promoting free trade usually involves not only international government-managed trade, but subsidies as well, such as those obtained through the Export/Import Bank and the Overseas Private Investment Corporation and various other methods such as foreign aid and our military budget.
Free trade should be our goal. We should trade with as many nations as possible. We should keep our tariffs as low as possible, since tariffs are taxes, and it is true; the people we trade with we are less likely to fight with. There are many good, sound economic and moral reasons why we should be engaged in free trade. But managed trade by the WTO does not qualify for that definition.
[H.R. 4986 was agreed to by a vote of 315-109 (2/3 required) on September 13, 2000. It was received in the Senate on Sept. 14. However, fearing the Senate would move too slowly, the language of H.R. 4986 was included in H.R. 2614 which was approved during the week of October 23, 2000.]
[WEDNESDAY, SEPTEMBER 6, 2000 ]
Minding Our Own Business Regarding Colombia
is in the Best Interest of America
Dr. Paul addresses the House:
Mr. Speaker, those of us who warned of the shortcomings of expanding our military presence in Colombia were ignored when funds were appropriated for this purpose earlier this year. We argued at that time that, clearly:
1. No [U.S.] national security interests were involved;
2. Their civil war was more than 30 years old and complex with three factions fighting;
3. There was no assurance as to who the good guys were;
4. The drug war was a subterfuge, only an excuse, not a reason, to needlessly expand our involvement in Colombia; and,
5. Special interests were really driving our policy - Colombia Oil Reserves owned by American interests, American weapons manufacturers, and American corporations anxious to build infrastructure in Colombia.
Unintended Consequences
Already our foolish expanded pressure in Colombia has had a perverse effect. The stated purpose of promoting peace and stability has been undermined. Violence has worsened as factions are now fighting for territory more fiercely than ever before as they anticipate the full force of U.S. weapons arriving.
The already weak peace process has been essentially abandoned. Hatred toward Americans by many Colombians has grown. The presidents of 12 South American countries rejected outright the American-backed military-operation amendment aimed at the revolutionary groups in Colombia.
This foolhardy effort to settle the Colombian civil war has clearly turned out to be a diplomatic failure. The best evidence of a seriously flawed policy is the departure of capital. Watching money flows gives us a market assessment of policy; and by all indications, our policy spells trouble.
There is evidence of a recent large-scale exodus of wealthy Colombians to Miami. Tens of thousands of Colombians are leaving for the U.S., Canada, Costa Rica, Spain and Australia. These are the middle-class and upper-class citizens, taking their money with them. Our enhanced presence in Colombia has accelerated this exodus.
Our policy, unless quickly and thoroughly reversed, will surely force an escalation of the civil war and a dangerous increase in our involvement with both dollars and troops. All this will further heighten the need for drug sales to finance all factions of the civil war. So much for stopping the drug war.
Our policy is doomed to fail. There is no national security interest involved; therefore, no goals can be set and no victory is achievable. A foreign policy of non-intervention designed only to protect our sovereignty, with an eagerness to trade with all nations willing to be friends, is the traditional American foreign policy. That policy would give us ... the greatest hope of peace and prosperity.
Let us think seriously about our foreign policy, and hopefully someday we will pursue a policy in the best interest of America by minding our own business.
[THURSDAY, SEPTEMBER 7, 2000]
Child Support Distribution Act of 2000
Dr. Paul addresses the House:
Mr. Speaker, I appreciate the opportunity to explain why I must oppose H.R. 4678, the Child Support Distribution Act. While I applaud the sections of the bill providing increased flexibility to states to ensure that child support payments go to benefit children rather than government bureaucrats, other provisions of H.R. 4678 present grave dangers to individual liberty, privacy, constitutional government and the sanctity of the American family.
I am particularly disturbed by the language expanding the use of the National Directory of New Hires, popularly known as the new-hires database, in order to more effectively administer the unemployment compensation system and deny visas and residency to non-citizens who are delinquent in child support payments. Identifying persons who are failing to fulfill their legal obligation to pay child support is a worthy goal. As an OB-GYN who has delivered over 4,000 babies in my over 30-year medical career, words cannot express the contempt I hold for those who would refuse to support their children. Similarly, preventing fraud in the unemployment program is obviously important to the nation's employers and employees whose taxes finance the unemployment insurance system.
Big Brother Advances
However much I share the goals meant to be accomplished by the expanded uses of the database, I must remind my colleagues that the road to serfdom, like the road to hell, is paved with noble purposes and good intentions. Expanding the use of the new-hires database brings us closer to the day when the database is a universal tracking system allowing government officials easy access to every individual's employment and credit history. Providing the government with that level of power to track citizens is to invite abuse of individual liberties.
The threat of the expansion of the new-hires database is magnified by the fact that it uses the Social Security Number, which has become for all intents and purposes a de facto national ID number. In addition to threatening liberty, forcing Americans to divulge their uniform identifier for inclusion in a database also facilitates the horrendous crime of identity theft. In order to protect American citizens from both private and public criminals, I have introduced legislation, H.R. 220 [Freedom and Privacy Restoration Act of 1999], which restricts the use of the Social Security Number to purposes related to Social Security administration so that the government cannot establish databases linked by a common identifier.
I would also remind my colleagues that the federal government has no constitutional authority to be involved in the collection of child support, much less to invade the privacy of every citizen in order to ferret out a few wrongdoers.
Constitutionally there are only three federal crimes: treason, counterfeiting, and piracy on the high seas. For Congress to authorize federal involvement in any other law-enforcement issue is a violation on the limits on congressional power contained in Article 1, Section 8 and the 10th Amendment of the United States Constitution. No less an authority than Chief Justice William Renhquist has stated that Congress is creating too many federal laws and infringing on the proper police powers of the states.
In a free society, constitutional limits on government power and the liberty of citizens must never be sacrificed to increase the efficiency of any government program, no matter how noble the program's goal. Again I ask my colleagues to keep in mind that the dangerous road toward the loss of liberty begins when members of Congress put other goals ahead of our oath to preserve the Constitution and protect the liberty of our constituents.
While the expanded use of the new-hires database provides sufficient justification for constitutionalists to oppose this bill, H.R. 4678 also must be opposed because it furthers the intrusion of the federal government into family life through the use of federal funds to support fatherhood programs.…[T]he federal government is neither constitutionally authorized nor institutionally competent to promote responsible fatherhood. In fact, by levying taxes on responsible parents to provide special programs for irresponsible parents, the federal government is punishing responsible fathers!
Federal programs promoting responsible fatherhood are another example of how the unintended consequences of government interventions are used to justify further expansions of state power. After all, it was the federal welfare state which undermined the traditional family as well as the ethic of self-responsibility so vital to maintaining a free society. In particular, the welfare state has promoted the belief that the government (i.e.: taxpayer) and not the parent has the primary responsibility for child-rearing. When a large number of citizens view parenting as a proper function of the central state, it is inevitable that there will be an increase in those who fail to fulfill their obligations as parents. Without the destructive effects of the welfare state, there would be little need for federal programs to promote responsible fatherhood.
Instead of furthering federal involvement in the family, Congress should stop pumping the narcotic of welfare into America's communities. Congress can do this by defunding federal bureaucracies and returning responsibility for providing assistance to the institutions best able to provide help without fostering an ethic of irresponsibility and dependency: private charities and churches.
Certain of my colleagues will say that this bill does promote effective charity through expansion of the charitable choice program by which taxpayer funds are provided to faith-based institutions in order for them to administer certain welfare programs. While I have no doubt that churches are better able to foster strong families than are federal bureaucrats, I am concerned that providing taxpayer funding for religious institutions will force the institutions to water-down their message - thus weakening the very feature that makes these institutions effective in the first place!
Furthermore, providing taxpayers' dollars to secular institutions violates the rights of taxpayers not to be forced to subsidize beliefs that may offend them. As Thomas Jefferson said, "To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhors is sinful and tyrannical."
In conclusion, H.R. 4678, the Child Support Distribution Act, violates the Constitution by expanding the use of the new-hires database and in so doing threatens the liberty and privacy of all Americans. H.R. 4678 also violates the Constitution by expanding the federal role in the family in the misguided belief that the state can somehow promote responsible fatherhood. By expanding the so-called charitable choice program, this bill also violates the conscience of millions of taxpayers, and runs the risk of turning effective religious charities into agents of the welfare state. It also furthers the federalization of crime control by increasing the federal role in child support, despite the fact that the federal government has no constitutional authority in this area.
Therefore, I urge my colleagues to reject this bill and return responsibility for America's children to states, local communities and, most importantly, to parents.
[H.R. 4678 passed on September 7 by a vote of 405 - 18]
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