Hist105 IP1

Federal Government

US Federal Government Expansion of Authority

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HIST105

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US Federal Government Expansion of Authority

The following essay will discuss tow examples of U.S. federal government expansion of authority. These examples will include a discussion of the Federal Reserve and its influences in expanding federal power as well as the Social Security Act. These expansion in power occurred between the U.S. Civil War and the end of the Civil Rights Era.

US Federal Government Expansion of Authority

The original goal of the American government was to establish independent states supported by a federal government. At this time there was absolutely no goal for the federal government to ever be more powerful than the states and in fact the federal government was created for the sole purpose of establishing a military. Once the Civil War was sparked the federal government required major funding to win the war. As a result the federal government began imposing taxes on the people. Prior to the Civil War citizens only had to answer to the authority of their state and paid very little taxes to the federal government.

Prior to the Civil War the government did not need major funding from the American people in which to operate but once the war started the only way to fund a military to stop the secession of the south was to tax the people. Despite the limited power of the government prior to the Civil War they emancipated the slaves displaying a great deal of power for the first time. The people in the South owned the slaves and they were considered valuable property but despite hundred of years of slavery the federal government forbid their ownership sparking the Civil War.

The origins of federal growth are in the Constitutional Convention but the act of emancipating the slaves was the first act of total authority perpetuated by the federal government (Holcombe, 1997). After the North one the war and the states were united back into one country the federal government continued to expand their power. Modern growth of the federal government began with the ratification of the 16th Amendment in 1913. The 16th amendment permitted the government to establish a federal income tax. This required citizens to pay taxes to the federal government on the money they earned or face potential the loss of property or even jail.

Federal Reserve Act

In 1913 the 16th Amendment became a part of constitutional law but the Federal Reserve was also created. The Federal Reserve Act created the Federal Reserve System, comprising twelve public-private regional Federal Reserve banks (Alessi, 2013). When the Federal Reserve Act was signed into law by President Woodrow Wilson a federal bank was created tasked with stabling prices, keeping reasonable interest rates, and maximizing employment rates. The Federal Reserve has a dual mandate which is first create the nation’s monetary policies and regulating banking institutions.

Over time this dual mandate has expanded and the Federal Reserve has gained untold power. The Federal Reserve currently plays a powerful role over the American economy and in fact the decisions made by the fed impact the global economy. The power of the Federal Reserve started with the “discount window” which was a main tool (Adams, 2013). When commercial banks in the Fed system fell short of money, they could borrow from one of 12 regional Fed banks (Adams, 2013). This made the fed the last resort lender for banks in the United States and American banks in foreign countries.

The Federal Reserve is responsible for establishing the interest rate and in fact can influence the federal interest rate by buying and selling Treasury bonds banks hold in reserves. The Federal Reserve can lower the short term interest rate to assist the economy when banks or financial institutes are struggling or it can increase the interest rate. In current society the interest rate is low due to the recent economic depression but if the economy experiences inflation this rate will automatically go up.

Over the years Congress has passed different acts that have strengthened the power and authority of the Federal Reserve. For example the Glass Seagull Act increased the regulatory power of the Federal Reserve over commercial banks. This act came about after the Great Depression because banks were blamed for improper investments and a lack of accountability in how customer’s money was invested. In order to control the actions of the commercial bank this act was created in 1933 (Adams, 2013).

Another act increase the authority of the Federal Reserve was the Bank Holding Company Act which gave the Federal Reserve authority over bank acquisitions. The Dodd-Frank Act was enacted in order to increase the transparency of the banking industry but the Federal Reserve was given the authority to establish the rules that will regulate this new accountability. The Federal Reserve is an independent agency with great power but many decisions are first run by Congress or the President. The problem with the Federal Reserve is the federal government has total control over the planning and controlling the America n economy through the banking system.

Social Security Act

The Social Security Act was another way the federal government increased their power through holding onto the retirement funds of citizens and deciding how this money will distributed. Social Security is not an optional retirement fund but one every American is required to pay tax money into the Social Security commission. The Social Security Act was created in 1935 in order to ensure when citizens retire they will have money to survive after they retire. The problem is the act further increased the power an authority of the federal government. It required another tax to be paid and gave the federal government total control over the retired citizens in America.

Not only did the social Security Act increase the power of the federal government it raised a constitutional question over the right of the federal government to take control of the states right under the 10th Amendment (DeWitt, 1999). In other words the reserve clause reserves power not specifically expressed in the constitution to the state. Since the constitution never discussed who had power over the retirement funds of the citizen then this right should have fallen to the state. This was not the case and even after being reviewed by the Supreme Court (appointed by the President) the Social Security Act was deemed constitutional.

Despite ruling the social Security Act was constitutional in the same year the Supreme Court ruled the Agricultural Adjustment Act (AAA) was unconstitutional. This act would impose a tax on all agricultural products but the high court ruled this was the right of the state. Despite the goal of the Social Security Act to create an old age reserve account the money has been used by the federal government for other purposes. Not only has the federal government expanded its power though this act it abused the power by taking this money and not preserving for the retirement of the citizen.

Conclusion

The federal government was originally created in order to create a military but overtime has become far more powerful than the states despite the fact this was not the intention of our forefathers. The federal government now has the power to mandate the retirement fund of the citizens in the entire nation but other expansion of their power includes areas of commerce, taxation, and infringing upon the individual liberties of the citizen. The creation of a centralized government ended u in an all powerful federal government.

References

Adam, B. (2013). It’s the Federal Reserve’s 100th Birthday: Here Are 5 Ways It Has Expanded

Its Influence over a Century. Retrieved February 13, 2014 from

http://www.theblaze.com/stories/2013/12/23/its-the-federal-reserves-100th-birthday

Alessi, C. & Sergie, M. (2013). The Role of the US Federal Reserve. Retrieved February 13,

2014 from http://www.cfr.org/international-finance/role-us-federal-reserve/p21020

Dewitt, L. (1999). The 1937 Supreme Court Rulings on the Social Security Act. Retrieved

February 13, 2014 from http://www.ssa.gov/history/court.html

Holcombe, R. (1997). Federal Government Growth Before the New Deal. Retrieved February

13, 2014 from http://www.independent.org/publications/article.asp?id=360