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State and local levels of government were more burdensome to people in the early stages of our country than federal levels. The national government mainly received revenue through tariffs and land sales.

The Constitution forbade individuals states from issuing paper money (Bills of Credit). Paper money is a vehicle of taxation. But many states went into the banking business, anyway. It was early crony capitalism. Plus, several states got into infrastructure business, like the Erie Canal and railroads, at public expense. Corruption is always part of government. Americans have always been land speculators. Taxpayers were saddled with debt. These boondoggles were an important way that government distorted the markets. Government was bigger than mere tax records made them look.

Land grants were used as money. Land was a big deal in the nineteenth century. The country developed differently because of subsidies than it would have by markets alone. The Civil War made a deep difference in the expansion of government and the development of big business. No state could secede. The states saw that they were mere administrative parts of the central government. Federalism was dead, but each state used its own regulatory power to burden companies. States sought central control and regulations to simplify business law. Anti-Trust Law and the Interstate Commerce Clause created some of the first federal agencies.

Bibliography (PDF): Mises.org/CLBib

Lecture 3 of 10 from Robert Higgs' Crisis and Liberty: The Expansion of Government Power in American History.

06/24/03 • -1 min

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