Nullification - A Way Out Of The Recession

Posted 06 Jul 2010

Trace: Welcome back to the RunToGold Podcast, I have a special guest with us today, Thomas Woods.

He is a senior fellow at the Ludwig von Mises Institute, a bastion for Austrian economics, he holds a degree from Harvard in history and a Ph.D. from Columbia, and he has a new book out called Nullification: How to Resist Federal Tyranny in the 21st Century.


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Welcome, Tom.

Tom: Thanks very much, Trace Mayer.

Trace: When I was in law school, we never talked about the 10th amendment. When I was studying for the bar, they said if there was an answer that mentioned the 10th amendment, it was wrong.

Can you give us a little bit of an overview on what nullification is and how the States can apply this?

Tom: Yes. Well, it is linked to the idea of the 10th amendment and it’s so funny how the legal establishment hates and tries to downplay, or smear, the 10th amendment when in fact the principle of the 10th amendment, that the states retain all powers not delegated to the federal government, was told to people as having been implicit in the Constitution as drafted. In other words, before there even was a 10th amendment in the Constitution, supporters of the Constitution told people that, in effec,t it was already implied in the Constitution.

This is the very principle that law schools try to pretend doesn't exist or is just stupid. Supporters of the document itself said this principle is already implicitly contained in it, so nullification just follows from this.

[caption id="" align="alignleft" width="243" caption="Thomas Jefferson"]Thomas Jefferson[/caption]

It comes from Thomas Jefferson, and then in turn through others since then. Jefferson said that if the federal government tries to exercise a power that is not one of the delegated powers, tries to exercise a power that would be unconstitutional, then the states should not enforce it within their borders. That is to say they should nullify it.

And Jefferson himself is deriving this idea from the Virginia ratifying convention of 1788. 1788 Virginians were very skeptical of the constitution, a lot of them were. Virginia was probably the most important state at that time, and so many of our great states men came from Virginia. I mean obviously James Madison, Thomas Jefferson, Patrick Henry, George Mason, the list goes on and on, so it's very important to get Virginia in.

And then there were skeptics, Patrick Henry among them, who said this constitution is going to yield you a government that will be impossible to control. It will grow beyond our ability to imagine, it's got a phrase in there that can become loopholes for ambitious politicians.

And Patrick Henry was told "don't worry", and this was the supporters of the Constitution talking, "don't worry, the federal government will have only the powers expressly delegated to it, and if the federal government should attempt to exercise any additional powers, don't worry. Virginia will be exonerated from those additional powers." So in effect there is the germ of nullification right there, in the state ratifying convention.

Now this is not talked about, the stuff I've just said... I mean you, if you picked up in American history textbook you'd be more likely to read that I, Tom Woods, am the King of England then you would to read any of that history.

Trace Mayer: That goes right along with our principal of judicial review, which is outside the scope of this interview, is that there are certain things that the establishment out of Washington definitely doesn't want to talk about, and nullification is one of those.

How can nullification, and this principle, help a state become an attractive place for capital, both human and economic? A place where people want to go and do business there, because you know we've got these huge unfunded liabilities that are hanging out there like a Damocles sword on the economy, we've paralyzed the entrepreneur, and they are withdrawing from engaging in the economy, providing value, because we've got all these regulations, just pages and pages that come out in the Federal Register. How can the states use nullification to create an attractive business climate for people?

Tom: That's a good question. Let me start by saying that when you're in an economic crisis, such as the one we continue to be in, I think people become willing to entertain ideas that they would otherwise reject, that people are willing to put a lot of possibilities on the table, they become skeptical of experts, they become more willing to listen to heterodoxy.

So certainly we saw that in the sudden meteoric rise in the interest in the Austrian school, mostly due to Ron Paul, but also simply because in an economic crisis the experts don't seem to know what on God's green earth caused it, and yet these Austrians seem to have been calling it for quite some time, and they have an explanatory basis for accounting for it. Suddenly people became interested in that.

Well, likewise of nullification. I think people five years ago would say “well, that’s some crazy idea”. Well, first of all it's not a crazy idea. I think my hope in my book Nullification is to show how non-crazy it is, how based it is in American history, and the Constitution, common sense, morality, everything you can name, demands that you have the power of nullification.

But I think now... could you imagine, let's say even right now but let's say how about in four or five years from now, let's say that economy is still stagnating, no sign of recovery. Or maybe it’s worse, it has dipped down substantially, and I mean that is certainly quite possible. Let's suppose that you had a few charismatic governors from influential states who said "All right look the federal government obviously is not interested in economic recovery, and they have proven that in their policies, and so okay maybe they want to bring the country down and destroy it and ruin the economy, but I'm the governor, I'm responsible for the people in this particular states.

And in this state we are going to try to carve out some type of livable existence here. We are going to try to carve out the most attractive business climate that we possibly can. So, beginning tomorrow, I am hereby appointing the following commission to go through state budget line by line, I want you to identify every single line in which we are spending money on some unconstitutional federal mandate that we know and they know perfectly well are unconstitutional, and from now on we are just not doing it anymore. The money does not exist, there is no more government fairy who's going to produce money out of thin air, the game is over. And we are just not doing it." Now there would be tremendous popular support particularly in certain states...

Trace:... like Texas.

Tom:... where the Governor would have the guts to do that. Yeah, like in Texas. Unfortunately the problem with Texas is that anybody who manages to get elected as governor of Texas, always has ambitions to become president, and that usually clouds his judgment. He always feels like "I'd better be restrained, I better not do anything that's not in the John

[caption id="" align="alignright" width="285" caption="John McCain and Mitch McConnell"]John McCain and Mitch McConnell[/caption]

McCain/Mitch McConnell play book. You know I must stay Mr. Moderate". So unfortunately, maybe they wouldn't do that. On the other hand, maybe there would be some governors who would realize that there's popular support for this. Chris Christie is getting a lot of support in New Jersey for just saying we're slashing and burning, because this is absolutely necessary.

Well add the slashing and burning, combine that with... oh and by the way we are sticking our middle finger in the face of the Feds who are imposing unlawful requirements on us, and they are contributing to our rotten economy.
I’d love to sit back and watch the fireworks.

Trace: …and especially if you get a state that's got enough critical mass, I mean Texas or Florida or who knows maybe even California, because it's such a mess out there budgetarily...

Tom: Yeah exactly, look obviously we have to do this, we do not have the money. Or I wonder if even conversely it might be the case that if we had a couple small uninfluential states do it the federal government might figure it's not even worth bothering them. Who cares if North Dakota isn’t forcing' No Child Left Behind', we’ll live with it. But it would be a precedent for the future .

Trace: …and we have seen what they have done with their state banks. North Dakota, or another small state, like a New Hampshire could...

Tom: …and I should point out with regard to the economy we are hearing about cap and trade back on the table again. There are already several states drafting cap and trade nullification, let's say I would assume North Dakota would have to be on board there. I mean theirs is a completely energy-dominated economy, I mean that's what they do. They would be ruined, they would be completely ruined by that stuff.

So if they can get away with that, or just the prospect of annoying the federal government and reminding people that it is possible to say no to these guys, well you know I can't guarantee that this is going to work, I can guarantee you that staying on the path we are on, just voting for some stooge every four years, that that certainly is not going to work.

Trace: Sometimes it's just in a mere flexing of your rights that you are able to exert a lot of political pain. I know whenever ideal as law enforcement officers in it's "no officer I don't consent to any searches," or "officer, am I free to leave?" Just to exert the constitutional rights instead of rolling over like some dead possum and letting him pilfer through all my belongings when I know that they're not going to find anything, so I don't want to be wasting taxpayer money in that way, so likewise I think they're going to see a little bit more, especially as the money continues getting tight, between states competing for the capital, getting people to move there, because you know the young people they're coming out of school now with 19.6% unemployment, and what happens when immigration starts happening in the opposite way, when people are like, oh man there are plenty of jobs over in Hong Kong.

And so the best and the brightest start leaving America as opposed to coming into it. We see Texas already catering to the young people, trying to bring the job climate in favor and create jobs for the young people, do you think we might see some of the states working in this manner to attract that capital?

Tom: Yes absolutely. Certainly just taking everything it in their own power, you know their own state sales, property taxes and things like that, certainly they can do all that. And then you can couple that with attempts to stand up to the Feds.

Even the best-known case of nullification in American history is when South Carolina nullified the tariffs in the 1830s and what wound up happening is that the federal government reached a compromise with them and said “All right, about if we lower the tariffs over the next 10 years?” Well all of our historians are big nationalists, and they hate nullification. All of our historians say "well that just goes to show that nullification is a failure and it doesn't work".

Are you kidding me!? That's exactly how it's supposed to work. Where both sides say look I'm not going to do what you want in you're not going to do what I want so now let's make some type of agreement. That's exactly how it's supposed to work.

Trace: And that's to show that, you know we've got the political framework at least somewhat there that we can work our way out, you know we could come to grips with the problem we've got and we could solve it, and still have our institutions and be able to provide a climate where we can still have a nice standard of living, we don't have to go back into the stone age, or become an Argentina.

Tom: Yes, exactly right. And yet that is exactly where we are heading, if we don't begin thinking in a different way.

Trace: This has been a fascinating interview, Mr. Woods. Thank you and we are out of time so everybody you have been listening to the podcast thanks. That was wonderful interview with Tom Woods, very powerful. And I recommend you look at, that way you can learn more about his work and get a copy of Nullification.