Your Private Wealth Is Threatened By Government Revenue Needs and Treasury Debt

Down Argentine Way

You Can't Change the Direction Our Nation is Heading, So Protect Your Wealth

By Ron Holland
December 22, 2010

There are many ominous parallels between Argentina and the U.S. and the question often asked is can America avoid the economic consequences that Argentina suffered from a fascist government combined with government debt and currency collapse? I believe the answer is likely NO!

"There are a lot of ways to ruin an economy. Argentina has experimented with most of them. It has devalued its currency, and revalued it. It has pegged it, and then knocked down the peg. It has regulated, controlled, inspected, taxed and confiscated. Following the 2001 crisis, earnings fell by 30% – with half the nation slipping below the official poverty line. What is remarkable is that the Argentine economy has survived at all." – Bill Bonner

Down Argentine Way was the 1940 film that made a star of Betty Grable, who played an attractive young woman on vacation who fell in love with a wealthy racehorse owner. The storyline actually reflected a common occurrence during the 25 years prior to the film debut.

In the early 20th century, "as rich as an Argentine" was a common expression, often used in connection with poor British aristocrats attempting to marry off their daughters to wealthy Argentinians. Argentina was indeed a wealthy nation; for example, we all know about Harrods Department Store in London. Few realize that during this period of Argentine prosperity, Harrods also ran a store in Buenos Aires.

Buenos Aires is still a beautiful and interesting city. If you visit, you'll learn that despite all the doom and gloom we hear concerning Washington debt and the dwindling dollar, there is life after debt repudiation and currency collapse. The same thing has been proven in Russia, Germany and other nations numerous times. It has even happened twice in the United States.

"May you live in interesting times" – A Chinese Curse

Since 2008, we've certainly lived in interesting times both in politics and in the markets. The US has tried standard Keynesian economic solutions with exploding deficits and trillions in government debt to solve the problems of mania, bubble and bust in real estate and the economy.

"Insanity is doing the same thing over and over again and expecting different results." – Albert Einstein

If you haven't noticed, the world is full of people who appear normal but by Einstein's standard are insane. The problem for us is that many of them are politicians and government "leaders."

Let's Take A Quick Look At Some Insanity Closer To Home

Do you really think voting Democrat or Republican is going to give you less government or more liberty?

Will Americans ever vote in overwhelming numbers for a third-party candidate in a national election?

If you continue to lose money with a particular investment advisor, why do you count on the performance improving next year?

The US has been accumulating trillions in national debt since World War Two. Why would we think this will stop with the latest GOP victory in the House of Representatives or with the success of a few Tea Party candidates?

I believe America will continue down the same road toward less liberty and more debt until we reach the end of the road. There is no political solution using our special-elite-interest-controlled two-party system. We will trash the dollar and keep building up our national debt until the world stops buying our Treasury obligations.

In recent weeks, China, Brazil, Germany and France have warned the US to get its dollar and debt problems in order, to no avail. This will continue for quite a while, but just as our current foreign policies are opposed by most of the world, so our financial policies are now being questioned by world leaders and economists. One day the world will have had enough of our dollars and will tire of financing our debt. The dollar will cease to be the world's reserve currency.

There is no way to know when this will happen; it could be next year or a decade from now.

My view is before the dollar free-falls and investors flee Treasury debt, the Washington politicians will be reaching hard for your wealth, to buy more time for their Madoff-style Ponzi schemes. We will see this begin with the 2011 Congress, and do not let your guard down because a few principled GOP candidates were elected — most are no better than the Democrats.

There is nothing unique about what we are going through as a nation; it has happened many times throughout history, to other countries. Here in the U.S. we have had so much prosperity that we forget that wealth confiscation and economic collapse are more the norm than the exception.

Look Back At Argentina in 1913

It was an important year [see 1913 Was a Very Bad Year].

While the British Empire was first in economic size, only the United States challenged Argentina for the position of the world's second-most powerful economy. The nation was blessed with abundant agriculture, millions of acres of farmland, navigable rivers and an accessible port system.

The country's level of industrialization was substantially higher than in many European countries and railroads, automobiles and telephones were commonplace. Argentina was one of the ten richest nations in the world, and the rate of economic growth from 1870 to 1913 far exceeded that of the United States or Germany.

In 1913 Argentina's GDP reached 72% of the US level. But by 1998 it had fallen to 34%. What went wrong?

Politics and corruption, inflation and currency depreciation were in double digits from 1945 to 1952, from 1956 to 1968 and from 1970 to 1974. And they were in triple digits and then quadruple digits from 1975 to 1990. In 1989, the inflation rate peaked at 5,000%! In one month the Argentine currency fell 64% against the dollar. Finally, on April 28, 1989, the printing presses were shut down because the government ran out of paper for banknotes and the printers went on strike.

Argentina's government defaulted on its debt twice between 1870 and 1914 and again in 1982, 1989, 2002 and 2004 (to foreign creditors). It led the world in selling IOUs to foreign investors, just as America does today.

On December 23, 2001, after GDP had declined 12% for the year, the government announced a moratorium on all foreign debt – $81 billion worth. It was the largest default in history. The 500,000 foreign creditors finally agreed to accept 35 cents on the dollar. China and other creditors of the US government should be looking at what happened in Argentina very closely.

More Ominous Parallels Between Argentina Then & America Today

In 1916 a new president was elected in Argentina; he had a foreign sounding name I can't hope to pronounce it but it is spelled Juan Hipólitodel Sagrado Corazón de Jesús Irigoyen Alem. He led a party called the Radicals, and their slogan was "fundamental change," with an appeal to the lower middle class. Doesn't this platform and campaign rhetoric sound familiar? "Change we can believe in" with a different phrasing.

He advocated a mandatory pension program, like the mandatory or "automatic" IRA" being pushed by the Democrats and some Republicans (including deep thinkers at the supposedly conservative Heritage Foundation). He wanted mandatory health insurance and supported construction of low-income housing to stimulate the economy.

Basically, like the American bailouts of 2008, in Argentina the state assumed control of a vast swath of the country's economy and began assessing new payroll taxes to fund its efforts.

Does This Remind You Of the United States Today?

With an increasing flow of funds into these entitlement programs, the Argentine government's payouts quickly became overly generous. Soon the government outlays surpassed the value of the forced taxpayer contributions. Put simply, it quickly became underfunded, much like our Social Security and Medicare programs are today.

The death knell for the Argentine economy, however, came with the election of Juan Peron. He preached a fascist and corporatist philosophy much like Mussolini in Italy. He and his charismatic wife, Evita, first targeted their populist rhetoric at the nation's rich. But as time went on the targeted group expanded to include most of the propertied middle class, who also became an enemy to be defeated and looted. Under Peron, the size of government bureaucracies exploded through massive programs of social spending and by encouraging the growth of labor unions.

Again, does this sound familiar? Remember that the automobile industry bailout was directed far more toward supporting unions and their underfunded retirement and health plans than helping GM or Chrysler. It was the same on the GOP side when Washington bailed out much of the corrupt and failing big players in the American and foreign banking systems. Trillions for Wall Street and zero for main street.

In Argentina, high taxes and economic mismanagement continued to take their toll, even after Peron had been driven from office. His socialist/populist rhetoric and ignorance of free-market economics remained on the political scene as Argentina's federal government continued to spend far beyond its means, just like America today.

Hyperinflation exploded in 1989, which is usually the final stage of collapse brought on by protectionist policies, inflated salaries and bureaucratic regulation of the economy. The Argentinean government's practice of printing money to pay its debts crushed the economy when inflation reached heights reminiscent of the Weimar Republic. Food riots were rampant; stores were looted; the country descended into chaos.

By 1994, Argentina's public pensions – the equivalent of Social Security – had imploded. The payroll tax had increased from 5% to 26%, but it wasn't enough. So Argentina implemented a value-added tax (VAT), new income taxes and a personal tax on wealth. These crushed the private sector. I fear we will soon see a similar increase in Social Security payroll taxes over the next decade in the US.

A government-controlled "privatization" effort to rescue seniors' pensions was attempted. But by 2001 even those funds had been raided by the government, the monies replaced with defaulted Argentine government bonds. (You can read more about how this could happen in the United States in my Get Ready for the Obama Retirement Trap.)

By 2002, the Argentine government's fiscal irresponsibility had produced a national economic crisis as severe as America's Great Depression.

Our problems promise to produce worse. The dollar is still the world's reserve currency, and our fall will resound in a way that Argentina's did not. Germany, China, France and other nations have warned us that there is limited tolerance for continued U.S. money printing. The jury is still out; but if the printing continues, America is not going to like the verdict.

America Runs the Risk of Being Blamed for the Greatest Depression

There are, as we have seen, parallels between Argentina and the road the US has taken. Following the 2008 meltdown, the entire world is in a tough situation. The US, predictably, has decided on currency depreciation to "solve" its problems. Germany, China and Russia express their displeasure.

The United States, doubtless, will be blamed for the coming meltdown. Other countries fear quite rightly what they have seen before, a tidal wave of repudiation and currency depreciation that could dramatically change the world. They know the US will postpone the inevitable – but sooner or later the cumulative impact of profligacy, waste and corruption will become unstoppable. The US economy will likely implode, taking the current world order with it.

We are living in the midst of a paradigm shift; the Internet is having an impact on politics, information and financial markets. Such a transformation has happened before, with Gutenberg's printing press in the 1500s, which destroyed the existing power structure and left Europe in turmoil. The invention of the press did to the religion, to the state and to the economy of the 16th century what the Internet is doing to Western society today.

This is an exciting transition period, when every established institution, from the FED to the two-party political system to Wall Street to our banking system, is being questioned and challenged by the alternative press of which we are part. Truth and change may be good in the long run, but in the near term they stress the system much like national bankruptcy and debt repudiation did in Argentina.

America Is the New Argentina!

"God grant me the serenity to accept the things I cannot change, courage to change the things I can, and wisdom to always tell the difference." –Kurt Vonnegut, Slaughterhouse-Five

Right now we can't change the direction our nation is heading, but with courage we can still take action now to defend our wealth while we work toward political change. The economic lesson to be learned from the Argentina experience is wealth and resources can be destroyed by big government and financial mismanagement. The United States is following a path similar to Argentina's. Our political and financial leaders are doing the same thing that those in Argentina did and somehow expecting the outcome to be different this time.

The results will not be any different. Protect your wealth, and help us warn and educate the public through your support of the foundations like the Mises Institute and the Foundation for the Advancement of Free-Market Thinking.

Your Private Wealth Is Threatened By Government Revenue Needs and Treasury Debt

By Ron Holland
January 18, 2011

There is nothing very complicated or prophetic about forecasting how Washington plans to steal much of the remaining private wealth of most American citizens over the next decade or so. This is the norm in history and politics throughout world history and this has always been the major function of governments.

While the Anglo-American establishment has whitewashed this part of history, politics and information over the last 150 years, today with the internet, the truth of our history is apparent to anyone willing to do the research.

Just as the citizens of America and Great Britain have in the past financially benefited from living under the Anglo-American Axis in many ways, today in these twilight latter-days of the empire so we will suffer under the wealth confiscation and likely retribution from the rest of the world due to the accident of our birthplace and citizenship.

As the American national debt grows larger, here are 15-plus probable attacks on your wealth over the coming ten years.

Your assets, benefits and future prosperity will be forfeit to Washington's elites as they try to buy time to right a sinking ship -- and to no avail. The impact on our wealth and future prosperity will likely dwarf what has happened before in Argentina, during the Russian collapse and in Germany with the post First World War Weimer republic.

This essay will discuss the threats and possible new taxes, penalties and controls designed to transfer wealth from the private sector to the federal government.

• Social Security Theft - As we see today in France, Social Security retirement ages will be further extended into the future. Wealthy Americans will be "means tested" and entirely forfeit their benefits, and Washington will eventually end cost-of-living adjustments for all but the poorest Social Security recipients.


• Manipulate Cost of Living Adjustments & Statistics To Steal Your Wealth - Even those receiving existing benefits will find their cost-of-living adjustments dramatically reduced over time with false inflation statistics just as we see today.


• The End of Capital Gains - The severe depth of the recession has bought US investors a couple of years extension of capital gains, but this will not be a permanent benefit regardless of the party in power. First, favorable capital gains treatment will likely be ended for all privately-owned investments except for US domestic stock and bond investments. Foreign stocks and bonds will be taxed at regular income tax levels while domestic securities, other than (non-productive assets) including mining and natural resource companies, will still be provided favorable capital gains treatment. If they are able to manipulate the stock market to new highs, then expect an eventual end to capital gains for US equities.


• The Probable Imposition of a Non-Productive Asset Gain Tax - Americans with highly-appreciated precious metals investments (including numismatics and collectibles) will find a substantial amount of their gains charged with an emergency non-productive asset gain tax. Not only will you lose capital gains treatment but expect an additional high penalty tax on gains as the last thing the establishment wants is hard money investors benefiting while the rest of population find their investments collapsing in value.


• This Tax Will Likely Be Extended to Mining and Natural Resource Stocks - Another reason to take your profits sooner rather than later in a crisis situation where the public with conventional investments will clamor for this type of retroactive tax.


• A Two-Tier Gold Price Structure - At the very least, there may well be a government enforced set or internal price for precious metals sales that operates outside the free-market pricing outside the jurisdiction of the United States. This could be handled by the non-productive asset tax mentioned about or used during a time of government gold confiscation to pay lower prices to American investors than the price outside of America. This is what happened during Roosevelt's earlier gold confiscation; and don't expect Congress to help you.


• The Risk of Private Gold Confiscation Will Continue To Increase - When the dollar and Treasury market crashes, Washington will enact legislation or use Presidential Executive Orders against gold investors to curtail your profits, add a confiscatory non-productive asset tax or confiscate your gold with some type of fiat currency exchange. In any case, they plan to end up with your gold as this will be the basis of a fake gold standard which may be used as the pretense to confiscate your gold. This will take place during the coming bond and dollar crisis by Presidential Executive Order. (Next month's letter will have a discussion on Presidential Executive Orders past and future.)


• The Fed & Washington Might Manufacture A Fake Gold Standard - Free-market public and private currency competition should replace the failed fiat currencies in use around the world today, But Washington will not give up their monopoly on currency creation without a fight and fraud against the American people; and in the latter stages of a dollar crash we can expect some type of complicated, fake gold standard or backing as a final fallback position. Just plan on this happening and it may well be the excuse used for outright gold confiscation.


• Washington Will Confiscate Large Private Retirement Fund Balances - Hungry, Bulgaria and Poland are already seizing private retirement funds to meet budget shortfalls. This will take place in the United States. Read the current report on the European pension seizures later in the newsletter under "What You Might Have Missed in the Press".
  
  The long-term confiscation and control idea is to eventually force all retirement benefits under the new automatic/mandatory IRA program where everything will be combined with and managed like your Social Security benefits. Wealthy and productive Americans will find their retirement benefits used to support the trillions in underfunded union, state and local government employee plans.


• Remaining Retirement Funds May Be Forced Into Mandated US Treasury Obligations - As in Europe, you can expect a percentage of your remaining retirement funds, and new required contributions in the proposed Automatic IRA accounts, will be forced into government bond obligations; and your funds will become the buyer of last resort of US Treasury debt. While the Chinese, Japan and offshore nations, central banks and investors are dumping Treasuries, your retirement security will be sacrificed to provide liquidity for investors selling the debt obligations.


• All Productive Working Americans Will Be Forced Into A Mandatory, Automatic IRA Scheme With Required Annual Contributions - Americans with limited or no savings may actually benefit with this program while those of us with substantial retirement assets will find our benefits stolen to prop up the retirement programs of cities, states and unions.


• Home Values May Continue To Decline From the Bubble Levels - There are still substantial levels of foreclosures and short sales on the market, which will be followed by more homes (currently held off the market due to low demand ) being listed for sale during any temporary price upturn.


• An End to the Home Interest Deduction - Proposals in Congress are already putting the home interest deduction on the table of deduction to be reduced or eliminated in the future. I project the home interest deductions will first be eliminated for wealthy homeowners and later expanded to the middle class. This will create further downward pressure on real estate values; and the current weakness may buy some time for homeowners.


• Rising Income & Estate Taxes - We have already seen this play out during the Lame Duck session of Congress. Estate taxes have been restored; and the only question is, will the rate remain at current levels or go up. Second, the Bush tax cuts have been extended for two years due to the bad economy, but both parties will soon raise income taxes due to revenue needs.


• A National Sales or VAT Tax Is Coming - Most western nations already have a VAT tax, and this is also already in discussion stages by Congress. Expect an initial tax rate of 5% or more in addition to existing state, county and city sales taxes; and the rates will only go up from there.


• State, Municipal & Union Bankruptcies & You Pick Up the Bill - Note that these costs, which will be bailed out by the federal government in many cases and ultimately by the taxpayers, will be in addition to the coming bailout on their existing retirement and health benefit plans. Note that there is finally some good news on this front as many Democrats and Republicans are attempting to curb the growth and powers of parasitic public employee unions.

What Should Americans Do About Washington's National Debt?

Everyone with any intelligence in the US and around the world knows that there is no way for Washington to manage the tens of trillions in debt and unfunded liabilities short of ultimate repudiation or hyperinflation. Thanks to Wall Street, bankers, and the Anglo-American financial elite, our ruinous debt-financing Ponzi scheme has been exported to most Western nations as their politicians have made a compact with the devil in delivering vote-buying programs and postponing the interest and debt reduction to future generations.

Watch the cuts and subsequent riots in Greece, Ireland, the United Kingdom and you'll see just a little of the future for the United States with its faltering world reserve currency status.

The question is, should the citizens and the formerly sovereign states of the United States wait for Washington's foreign creditors to seize the remaining government and private assets left after our politicians have finished with us?

Our politicians are in the process of totally bankrupting the country, individual states and municipalities; and in a less than a decade will have confiscated most private wealth and placed tens of trillions of more debt on future generations. Should we act now before Congress and our politicians loot our personal, retirement and real estate wealth; destroy our Treasury obligations; and kill the dollar? Should we democratically take matters into our own hands before the looming dollar and debt crisis?

One alternative is for Americans in the individual states to organize and work toward a "Washington National Debt Constitutional Amendment" and repudiate much of the Washington government debt before it bankrupts every private American citizen. Otherwise, the massive increase in the level of indebtedness due to the meltdown and depression may first bring down the Treasury market followed by the US dollar; and this will destroy the American economy for decades to come.

The American people need to meet the problem on terms which will make the best of a difficult situation for the nation and our personal financial security instead of allowing foreign creditors, our financial establishment, and Washington to buy more time for them through the confiscation of our private wealth, financial security and liberty.

Only a grassroots effort by the American people through state-nullification or the constitutional amendment process have any hope of success. The alternative is to expect those who are destroying our economy and nation to solve the problem they created without sacrificing us in the process. This is just wishful and foolish thinking.

On December 21, 1913 the New York Times stated,

"New York will be on a firmer basis of financial growth, and we shall soon see her the money center of the world."

This was one day before the Federal Reserve Act was hurriedly passed and signed into law with limited debate by a Congress controlled by Washington and banking special interests.

These undemocratic tactics were designed then -- just as today -- to thwart the will and overwhelming opposition of the American people to expensive handouts for Wall Street and those shadowy few who stand behind the banking system.

Now, Washington's illegitimate national debt is growing exponentially due to the bailouts and stimulus bills as Congress tries to jump-start a depression threatened economy. This additional debt load will, within the next decade, bankrupt our nation and impoverish most productive, working Americans.

The Federal Reserve, together with the above financial elites, essentially manufactured the credit and real-estate bubble. The result: continued enhancement of foreign investment in their Treasury debt Ponzi scheme along with obscene profits for Wall Street at the expense of the American people.

This scam by our financial establishment makes Bernard Madoff's despicable actions look like Mother Teresa's charity operation in comparison. An unintentional consequence of these actions was the meltdown in markets, the credit crisis and spreading global depression when the bubble finally burst.

Now there is a cover-up of the cause and coming global run, crash and probable collapse of US Treasury obligations because of the dramatic increase in Washington's national debt to unsustainable levels. This economic tidal wave threatens the financial security and wealth of every American along with their savings, real estate, retirement plans, investment portfolios as well as their promised Social Security and Medicare benefits.

Concerned Americans must bypass a corrupt Congress and the leadership of both political parties often controlled by special interests at the national level and seek a debt solution through the constitutional amendment and nullification process starting at the state level.

Repudiating the illegitimate national debt of Washington politicians and special interests will allow existing treasury-debt-obligation owners and investors time to dispose of the unlawful debt created only to profit special financial and corporate interests. They own and control majorities in the House and Senate, much of the party leadership positions, and the Federal Reserve System ...

Bankrupted States = Constitutional Convention and the Proposed Constitution for the 'Newstates of America'

By Nancy Levant, NewsWithViews
December 24, 2008

The strategically planned and forthcoming Constitutional Convention, which will address “a balanced budget,” is quite a cover story. Therefore, let us consider the truth behind this elaborate usurpation scheme.

As the country is failing in every direction -- from the former individual in America to each and every individual state in the country, the total economic crash of EVERYTHING -- and all converging at the very same time and as we speak -- is, let us say, extraordinarily convenient.

Add this convenience to the fact that on March 27, 1969, President Richard Nixon divided the country into 10 regions via the Government Reorganization Act. Then with Nixon’s Executive Order 11647, the nation was divided up into 10 administrative regions on February 14, 1972 (Federal Register February 12, 1972, Vol. 37, No. 30), which also established the Federal Regional Council for the newly designed 10 regions.

Now, why did former President Richard Nixon redefine the United States? He did so because the United Nations passed a resolution that the United States must reorganize into 10 regions. Can you name your regional directors? Who are these councils, and where are their office buildings? Actually, you don’t know because they were not “elected,” nor are they mentioned on your tell-a-visions. Your regional councilmen are “appointees.” Can you tell me who appointed them to regional power? Bet you can’t.

And the reorganizing of our former nation, achieved more than 25 years ago, and of which you know nothing, certainly suggests that “government” as we knew it changed a long time ago. With all this information now in hands, ask yourselves what would happen in the event of a really big, national “crisis?” What powers do your states hold, or for that matter, your counties or local governments hold -- especially since they are all bankrupt AND have regional managers.

Add this to your plate: now that you know your nation has been redrawn and redistributed, what if I told you that a new constitution was written at the same time the country was divided into 10 regions? Ever heard of the Proposed Constitution for the Newstates of America?

In 1964, the Ford Foundation funded an outfit called the Center for the Study of Democratic Institutions to write a new constitution for our nation. After 40 drafts, a staff of 100+ people, and at a cost of 2.5 million dollars a year, a decade later (1974) the Proposed Constitution for the Newstates of America was finished. Mind you -- a ten year, $25,000,000.00 project…let us therefore assume that the funding foundation(s) were very serious about this investment. And two years later, in 1976, Mr. Nelson Rockefeller, who at that time was the president of the Senate, introduced HCR 28, which called for an unlimited Constitutional Convention -- the perfect tool whereby to dissolve our current constitution and implant the handily written new constitution -- and all without congressional oversight or public knowledge.

Didn’t go well for Nelson in 1976, but guess what? A new Constitutional Convention is right around our corners again -- with 32 states requesting the Con-Con, and with only 34 required for it’s convening -- and with most American states now totally, conveniently, bankrupt.

Look at it this way: the Feds can not possibly bail out 50 states because they’ve already given all our money away -- right? And we can’t pay taxes anyway because we have no jobs. Gosh…what can the Feds possibly do to rectify this horrible situation?

Dialectically speaking, they’ve had their answer of choice in the wings for decades. It’s called dissolving state, county, and local powers for centralized power. Gosh…it’s the United Nations mandate for one world government and regionalization of the United States -- as commanded in the 1960’s. Do tell, folks…do tell.

The current economic “crisis” is the tool, the highly planned and patient tool, to set up the global governing bureaucracy for real and for certain with the second convening of the Constitutional Convention in the wings. The big wigs tried it before in 1976, and they are trying again, but this time having manufactured national bankruptcy as public fear-based appeasement.

I suggest you read your forthcoming constitution, which is also your forthcoming nightmare. Here is just a taste of your global privileges from your Constitution for the Newstates of America:Article 1A Sec. 1 - 'Freedom of expression shall not be abridged except in declared emergency."

Article 1A Sec. 8 - "The practice of religion shall be privileged."

Article 1B Sec. 8 - "Bearing of arms shall be confined to the police, members of the armed forces, and those licensed under law." See the note below from a respected teacher [and friend] in the UK:

"Britain is already divided into regions. The region of Kent includes a bit of France. Most of our laws now come from Brussels. We have never agreed to this. After Heath lied to get a 'yes' to the Common Market in 1879 or so, Lib Lab Con in the house of Commons have steadily, traitorously handed over government of our land to Brussels. We do not elect the officials in the regions. Most people are unaware they exist.... MPs have given up representing us. Many people are just TV fodder."

The Databasing of America

The Databasing of America – Part 1

By Jim Malmberg
March 18, 2009

There is little doubt that the United States is far ahead of the rest of the world in its use of information technology. The country’s drive for supremacy in the Cold War, and the race to the moon in the 1960’s, were the driving forces behind our development of computers.

At first, this trend had little impact on American consumers because computers were both difficult to operate and expensive to purchase. But as with all technical innovations, price was driven down over time, making mass-marketed computer applications viable.

The acceptance of computers, and specifically the use of databases, which store huge amounts of information on consumers, is having tremendous societal impact; affecting the way credit is granted and denied, standards of living, socially acceptable behavior, hurting small business and changing our views on personal privacy.

So, in a series of articles, we’re going to examine these issues in depth.

Information Technology – The Early Years

America’s use of information technology is a great story. Like all great stories, it is full of high-points as well as failures.

North American Rockwell, the builder of the Apollo rockets that took the first humans to the moon, accomplished its task with 20 megabytes of disk space. Those 20 megabytes of space didn’t sit in a desktop computer. They resided in a series of computers that took up an entire building the size of two city blocks. Both the company and NASA were more reliant on engineers using slide rules than they were on computers. But use of computing was a necessary element in the race for the moon, and the Apollo program showed that computers work. This is a high-point.

When Bill Gates developed his Windows operating system, he attempted to sell it to IBM for $100,000. IBM said "no". You just know that there is somebody over at IBM who would prefer not hearing this story told again.

As with virtually all technological innovations throughout the history of mankind, the use information technology started for military purposes. And it began in earnest in the 1940’s when the allies were trying to crack Germany’s Enigma code. This was a secret code that Germany used to direct its U-boats scattered around the globe. The best minds of the United States and Britain worked on this problem for years, but it was actually the eventual capture of a cipher machine (a very simple computer) from the Germans that led to a breakthrough. From that point on, computers were used in military intelligence.

By the 1950’s, the predecessors to today’s computers were being developed for the government. Big, bulky, unreliable machines with very little processing power, they could do simple mathematical calculations. Built with cathode ray tubes, they threw off so much heat that they could only be operated for short periods of time. Modern hand-held calculators possess more processing power, but these were the first necessary steps that had to be taken for us to gain access to the technology we have today.

And throughout the Cold War and the race for space, the US Government continued to drive the development of computer processing power and disk storage space. By the 1980’s, development costs had been driven down to a point that businesses could afford to purchase personal computers for their employees, and a small group of affluent consumers could afford computers in their homes.

At this same time, this cheap and easy access to data processing power was the impetus behind a consolidation within a community of data gatherers; what had been the local credit bureaus — 2,600 companies that had been owned by local merchants with the express purpose of serving the credit needs of the local community began to be gobbled up by larger corporations.

The local bureaus, which had never been intended to turn a profit and which had always operated in the best interests of the community, were viewed by the conglomerates that purchased them as a panacea of information that could be bought and sold for a profit, regardless of the consequences. Over a 20-year period, those 2,600 companies were reduced to three companies of any consequence, and the large consumer database was born.

Add to this the emergence of the Internet, and seeds were sewn for a meltdown in business, political and even personal ethics which continues to this day. A paradigm shift in the way that consumer data was collected and sold occurred, along with a shift in acceptable business practices. The "customer" who had always been viewed by businesses as their bread and butter, someone that you would never consider injuring, suddenly became a commodity. And the personal data provided to businesses by consumers for a specific purpose, such as securing a loan, somehow became the property of the business; something that could be sold.

To make matters even worse, data provided to small businesses that still wouldn’t dream of selling information about their customers changed hands. The data was — and for that matter still is — provided to the three credit repositories, who in turn sell it.

All for the Sake of Convenience

As consumers, we became our own worst enemies. We thought nothing of providing our most personal information to virtually anyone who asked for it. Websites such as Yahoo provided personalized news and entertainment. But if you want to see your horoscope every day, you need to provide them with your date of birth. If you want to see the forecast for your city, you need to provide them with your address. And if you want to see a stock report, you need to tell them what commodities you own.

We traded all of this information for no money and a little perceived convenience.

The companies that we have given this information to have amassed huge databases of information on us. Over the years they have come to know our likes, dislikes and perversions. And they have used this information to better target their advertising and to sell lists of information to the highest bidder.

Banks too have gotten into the act. They purchase and sell consumer information to list brokers and data providers. They have affiliated companies that they share information with, regardless of the consumer’s wishes. And as individuals, there is little that we can do because our representatives have actually codified some of their most egregious practices, saying that it is in the best interests of commerce, and hence, the nation.

The truth is the companies that engage in these practices now donate so much money to candidates that they have "paid" for this legislation.

The Politics of it All

The Gramm-Leach-Bliley Act, which was an abominable piece of legislation, allowed the banks to get into other lines of business and share data. It has led to higher consumer prices for banking services and intrusions of privacy.

The Fair and Accurate Credit Transactions Act took all authority away from the states to regulate the data sharing practices of creditors with regard to their affiliate companies. This legislation was passed even though numerous polls show that more than 90% of Americans want stronger privacy protections. So whose interests do you think Congress was actually protecting?

And more bad legislation is on the drawing board. Sen. Dianne Feinstein (D-CA) has been proposing privacy legislation for years that strengthens current privacy laws in some states, but at the same time sets a federal privacy standard which would weaken laws in other states.

She has advocated specifically forbidding the states from setting higher-than-federal privacy standards for many companies in the financial services and database industries. She proposes legislation and stands behind a bully-pulpit disingenuously claiming to represent consumers, while she accepts large campaign donations from the very companies that she claims to be protecting us from.

Her proposals are far from the worst though. It’s like letting the fox watch the hen house. Something stinks in Denmark.

The fact is that the databases containing our personal information have become so valuable that multi-billion dollar corporations have been built up around them. These include credit reporting agencies, commercial database companies, banks and list brokers. Some try to operate in obscurity while others are well known.

These companies sell their information to anyone who wants it. Over time, inaccurate information is added to their data, either because of a simple thing like a name mix-up, or because accuracy is less important than profit. The reason is actually far less important than the results; 79% of consumers now have inaccurate information on their credit reports.

The credit reporting companies know that their data is inaccurate, yet they continue to sell it. This hurts every business that relies on this data to make credit decisions with their customers. And consumers are also hurt. These companies sell worthless credit monitoring services to consumers, giving them the impression that credit monitoring will protect them. It won’t. And it won’t help them restore their good credit in the event that their identities are stolen either.

Accurate or not, most of these database-driven organizations reap large profits and have no intention of letting the details get in the way. Poll after poll shows that Americans are concerned about their privacy rights, yet our legislators continue to pass anti-consumer legislation, and we let them get away with it. Some of this legislation is passed out of shear ignorance, but a large amount of it is due to the fact that Washington has become an eBay for the rich and famous:

• a place where political favors are traded for ever-larger campaign donations, and where political pork is balanced on the backs of hard working citizens
• a place where "doing what is right for America" has been traded for "getting re-elected at any cost"
• a place of leadership without any leaders.

Even the most political of politicians of 40 years ago might have trouble dealing with the ethics, or rather the lack thereof, used in Washington today. And the polls bear this out too. Less than one third of Americans say that Congress is doing a good job. And while a lot of people are still praising the new President, his numbers have been falling steadily over the past month.

The End Results

The results of this trade in personal information are already coming home to roost. Inaccurate information in these databases leads to the denial of credit to those who deserve it. It also leads to the granting of credit to those who can’t afford to it pay back. This means that merchants can’t rely on the information they use to grant credit. This trend has a lot to do with the current mortgage crisis. Lenders made a lot of loans to people based on inaccurate information. While a lot of this was because of the fact that lenders were offering no-document loans, it doesn’t alter the fact that even with these loans they were looking at credit reports. And those reports contained a lot of inaccurate data.

The databases compiled by the three large credit reporting agencies are used to power the country's credit scoring system. Since, as previously mentioned, 79% of all credit reports contain inaccuracies, the data used to derive credit scores is corrupt. Therefore, the scores themselves must also be corrupt. But the companies that provide credit scores claim that their methodologies are proprietary. And the three credit repositories claim that they don’t create the data — they just report information which is provided to them by creditors. It’s their way of saying that they have no responsibility for their reports; something which the courts have not agreed with of late.

The result is a system with little accountability; a system that is broken at its core, and consumers and businesses that are left in the dark.

Identity theft is at an all time high and growing faster than any other form of fraud. Easy access to data, and security procedures that are lacking within many companies, has helped fuel this process.

Private-sector data breaches have included outright thievery at companies like TJX, ChoicePoint and LexisNexis, which were well publicized, as well as a number of less publicized cases involving the loss or theft of computers at universities and medical providers.

This trade in data has led to invasions of privacy — unsolicited marketing offers that come in the form of mail and SPAM. And when you buy from one of these offers, it is likely that your file will be updated and sold again and again, allowing marketers to target you even more effectively.

And because of the shear volume of personal information that companies control, the large commercial databases contain huge amounts of inaccurate information. The companies that control them are constantly trying to merge data from disparate sources, without the assistance of the consumer.

So if your name is John Smith and you live on Main Street in Peoria, and if there is another John Smith who also lives on Main Street in Peoria, there is a very good chance that your information will be merged at some point.

The federal government uses some of these same commercial databases for national security purposes. The ramifications of this are disturbing and best.

But it is not just commercial databases we need to be concerned with. Governments have also gotten into the act by making public records available via the Internet. Public records include things like your voter registration information and the deed to you house. Often, they include Social Security numbers.

The purpose of public records is to allow citizens to keep an eye on government. But the government has turned these tables on the citizens. Making these records available electronically is misguided.

We’re going to examine all of these issues. We’re going to look at the ramifications of what is happening today and what the future may hold. We’ll examine how these databases impact on your credit, your business and your privacy. And we’ll look at efforts to both diminish and to enhance privacy rights, along with stories of both success and failure for consumer rights.

In the end, we’ll try to paint you a picture of how the databasing of America affects you personally — how it costs you money, lowers your standard of living, and threatens your privacy.

And finally, we’ll tell you what you can actually do to start protecting yourself.

The Databasing of America – Part 2

By Jim Malmberg
March 20, 2009

In part 1 of our series we discussed a number of factors that are impacting how the personal data we all provide to companies is bought and sold. In this segment, we’re going to look at our broken political process and why it is having such a negative impact on both credit and privacy.

It’s all about the money!

In the 2004 election alone, the financial industry contributed more than $330 million to campaigns. That is more than $1 for every man, woman and child living in the United States; and it represents nearly a six-fold increase in industry donations since 1990. The 2008 election cycle saw an even more dramatic increase with more than $463 million in donations from the financial services industry.

This kind of money makes it very difficult for consumer voices to be heard. It also makes it very difficult for our politicians to represent their constituents rather than large corporate donors; and this is just from one industry.

Election Cycle	Total Contributions	Soft Money Contributions	Donations to Democrats	Donations to Republicans	% to Dems	% to Repubs
2004*	$339,898,747	N/A	$140,961,059	$197,997,296	41%	59%
2008	$463,472,524	N/A	$234,776,491	$227,764,813	51%	49%

One notable change from 2004 is that the industry is willing to play to whomever it thinks will win the election. Although both the Republicans and Democrats received more donations in 2008 than they did in 2004, the Democrats were the big winners. Their donations increased by 67%. The Republicans only saw an increase of 15%.

The 20 senators getting the largest donations from this industry segment all received well in excess of $500,000 in 2004, with Charles Schumer topping the list. He received a little over $3 million. By 2008, the top 20 all received more than $1 million. Excluding the Senators running for President (Obama, Clinton, McCain, Romney), the top recipient of money from the industry was Chris Dodd with more than $6 million in contributions.

Congressmen did nearly as well, with 19 out of the top 20 recipients getting more than $500,000 in 2004. In 2008, all of the top 20 recipients in the House received more than $600,000 and with seven of them receiving over $1 million. Most notable among these are Charles Rangel (D-NY - $1,364,810 – the #1 recipient) and Barney Frank (D-MA - $1,024,898 - #7 recipient). Both men chair key committees dealing with finance.

But Presidents and presidential candidates receive the most money.

• In 2004, President Bush received more than $33 million of financial services money for this reelection bid — 10% of the total contributions from this industry, all going to a single candidate.
• In 2008, Barack Obama received $38 million from the industry.
• It is also notable that his Chief of Staff, Rahm Emanuel, who ran for Congress in 2008 received more than $1 million himself from the industry.

The effect that this money has on the political process is staggering. The end result has been a variety of federal bills that are starkly anti-consumer and which have made it significantly more difficult for the individual states to protect their citizens. Some of these have already become law. Others are still in the proposal phase, but likely to win approval.

Where there is smoke, there is fire

When you or I work for a company, it is part of our job to show loyalty to that company. There is an unwritten contract that says, “I won’t intentionally do anything to hurt your business, and I’ll tell you if I have a conflict of interest.” Moreover, most companies have policies that allow them to fire anyone who acts in a manner that is counter to the interests of the business.

A good example might be of an employee that works for General Motors, designing new cars. If that employee accepts a “gift” from a competitive company, and then that competitor comes out with a new car that looks just like a new car that GM is getting ready to introduce, common sense says that something is wrong. When GM discovers the “gift”, not only can they fire the employee who received it — if they can find enough evidence that he was the source of the leak — they can also have him prosecuted and sue him personally. Why? Because such behavior makes him crooked.

But in Washington, DC, this behavior is apparently perfectly acceptable. For instance, of the 13 Senator’s who sponsored the bankruptcy reform bill a couple of years ago, every single one of them received more money in campaign donations from the financial services industry than from any other industry segment. When it looks like a bribe, and smells like a bribe, then it probably is a bribe.

Senator Name	Party & State	Financial Services Industry Donations	Financial Svcs. Industry - Largest Campaign Contributor?
Chuck Grassley	R-IA	$1,123,283	Yes
Tom Carper	D-DE	$988,181	Yes
James DeMint	R-SC	$1,371,601	Yes
Chuck Hagel	R-NE	$561,684	Yes
Benjamin Nelson	D-NE	$974,505	Yes
Richard Shelby	R-AL	$2,263,116	Yes
John Thune	R-SD	$1,763,985	Yes
Mike Crapo	R-ID	$594,024	Yes
Mike Enzi	R-WY	$459,993	Yes
Orin Hatch	R-UT	$944,986	Yes
Jeff Sessions	R-AL	$850,370	Yes
John Sununu	R-NH	$824,396	Yes
David Vitter	R-LA	$1,007,135	Yes

A similar pattern can be found in the sponsors from the House of Representatives as well.

This particular legislation, which was signed into law by President Bush, made is significantly more difficult for consumers to declare bankruptcy or dig themselves out of financial debt. The lending industry argued that the old law was being abused even though they were aware that the vast majority of bankruptcies in the United State occur due to one of two factors: either an uninsured major medical emergency or unemployment.

Several proposed amendments to the bill that would have required the financial services industry to act more responsibly were defeated. So while the law significantly curtails consumer rights, it places no additional restrictions on the industry. Credit grantors are still allowed to use predatory lending practices and to solicit customers even if they know that their solicitations are going to people that can’t afford more debt.

Ironically, the bill may have increased the number of foreclosures that we are currently seeing, and it is likely that history will show us that it also resulted in the collapse of certain banking institutions. At the time the industry was lobbying so hard for the bill, certain members of the industry had no idea that they might be committing suicide.

While the bankruptcy law has little to do with the sale of consumer data, it is indicative of what has become a widespread problem in Washington. Legislation is definitely for sale if you have the right people in your pocket.

And the legislation is making life for consumers significantly worse with respect to matters of personal and financial privacy.

The legislative record

In 1996, Congress updated and reformed the Fair Credit Reporting Act (FCRA). As a part of the reform procedure, new portions of the law forbad the states from enacting credit laws preventing credit grantors from sharing consumer data with their affiliates. But these restrictions had a sunset-clause, and they were set to expire at the end of 2003.

The theory in implementing the state restrictions was that it was in the best interests of the nation, and the credit industry, not to force companies to comply with different regulations in each state. Based on the congressional debate that took place in 1996, it is clear that the state restrictions were enacted reluctantly.

Unfortunately, the new federal law left consumers exposed to privacy violations. Furthermore, the sharing of data with affiliates also led to those affiliate companies attempting to match the data received from their banking partners with other data that was housed in commercial databases. All of this was done with minimal standards of quality control and without regard to consumer privacy.

The end result is that one consumer’s information easily got mixed up with another’s, so the database data became corrupted. And since all a credit report really is, is a series of records stored in several databases, this has led to errors on 79% of all credit reports.

This erroneous data is relied upon by businesses and lenders to extend credit. It hurts business in a variety of ways. Obviously, when incorrect data is relied upon it will lead to mistakes. Loans will be made to people who can’t afford them. This in turn leads to higher default rates on everything from credit cards to home mortgages. Other people who actually have good credit will be denied loans because of mistakes in their credit file. This means that businesses will turn away perfectly good customers that would otherwise be adding revenue to their bottom line.

Everyone, with the notable exception of the companies that sell this erroneous data, get hurt.

The lack of general privacy standards has also led to problems. These include the theft of personally identifiable financial and medical data on consumers, identity theft, more inaccuracies on credit reports, etc… The list goes on and on. These privacy breaches have even led to murder.

By 2003, consumers were fed up. Numerous studies showed that nine out of 10 consumers wanted stronger privacy standards. In California, the strongest privacy law in the country was passed. It even allowed consumers to opt-out of affiliate-sharing of information by credit grantors.

But the financial services industry wanted nothing to do with California’s law. And it feared that other states would make similar moves. So the large credit grantors sent their lobbyists to Washington and they got Congress to pass the Fair and Accurate Credit Transactions Act (FACTA). And, when passed, FACTA made the 1996 temporary moratorium on state privacy laws permanent, even though this provision was opposed by the Attorney’s General in 49 states.

This means that the states have absolutely no power to protect their citizens from certain egregious practices by credit grantors even if the voters within those states want such protection.

FACTA’s permanent preemption of states rights seems to have started a trend. Since becoming law, a variety of other proposed laws now include state law preemption provisions.

Where is this trend headed?

The Bush administration used the incidents of 9/11 to rapidly move forward with a variety of programs using centralized databases. These programs have a number of things in common. Each of them looks at massive amounts of consumer data. Most of the program managers have expressed an overwhelming desire to merge data from commercial databases with the data that they develop on their own. Most of them have few privacy protections. And we are currently unaware of any government database program investigating the use of commercial databases, expressing any concern over the fact that commercial databases are widely known to contain inaccurate information.

What will happen under the Obama administration is anybody’s guess, but so far there have been no policy statements from the new president that would lead us to believe that he wants to reverse the prior administration’s policies.

The fact is that merging commercial data with government data is just a very bad idea. The government’s position has been that it needs access to this data to protect the country from terrorists. What it fails to point out is that, if the data that is put into government screening databases is inaccurate, then by definition, the information that comes out of those databases will be inaccurate. The current path could actually make us more vulnerable to terrorists.

But that aside, the Bush administration and certain members of Congress made many of the programs using databases a matter of "patriotism". This has made it very difficult for Congress to oppose them, although there does appear to be some movement to a more common sense approach. It has also made it difficult for voices of reason to be heard.

The implications of government use of database technology are frightening. And a large part of the problem stems from the fact that many legislators are, for all practical purposes, computer illiterate. Many have latched onto ideas that they think sound good, and they take action without any understanding of the ramifications of their actions.

Across the country, both local and state governments have made many public records available online. Many of these records contain information that is highly personal and which can be financially damaging, such as Social Security numbers. In fact, with very little effort, anyone can find Social Security numbers, names, addresses, birth dates, the amount people paid for their house, where they went to school, etc… all available online through public record information.

And while some local and state governments have passed laws that restrict this type of distribution, others continue to make information even more accessible. If the government was a company, and citizens were considered the customers, there is a good chance that by revealing this information, the company could be found criminally negligent. Yet the government sees nothing wrong with its actions.

Under the Real ID Act, which will eventually regulate the information that must be contained on a driver’s license laws, it will be impossible for you to take public transportation, enter a court house, collect any form of government benefits such as Medicare or Social Security, or even exercise your constitutional right to vote without first flashing an ID card. And who knows if the data that the government will be using to identify you will be accurate.

I’m from Washington and I’m here to help!

There is perhaps no phrase more frightening. A group of people, who sit in a city making laws that impact nearly 300 million people, scattered across more than three million square miles. And they believe that they know more about what is in your best interests when it comes to finances and privacy than your local mayor or state legislators.

Just as frighteningly, they seem to think that they know more about business than virtually anyone. If the economy tells us anything, it should be telling us that these legislators need to be reigned in. Many of the laws they have passed over the past decade are coming home to roost now in the form of higher unemployment and failing businesses.

The problem with federal laws that strip the states of power is that even if the laws are well written, they don’t allow the states to come up with more creative solutions that address the needs and desires of their citizens.

For instance, a couple of years ago when it was revealed that ChoicePoint, a commercial database company, had exposed the identities of nearly 150,000 consumers to thieves. Shortly thereafter it was revealed that LexisNexis, another commercial database company, had revealed the identities of 330,000 consumers to thieves.

Neither of these incidents would have been made public if California hadn’t had a law requiring companies that expose consumers in this way to notify impacted consumers.

Since these incidents, most states have now passed laws that are similar to California’s. Yet, there has been an ongoing campaign in Congress to pass a national standard for data breach notification that would nullify some or all of these laws.

You may still have democracy available at your state and local levels, but at the federal level it is very apparent that Congress has sold out to the highest bidders. This means that as individuals, we all need to do everything we can to protect our own data, and then cast our votes against those that would allow our data to be sold without explicit permission.

The Databasing of America – Part 3

By Jim Malmberg
March 24, 2009

In part 1 of our series, we looked at the history of information technology and how the information that we provide to commercial and government entities is being used. In part 2, we looked at our broken political process and how corruption in Washington is quickly resulting in reductions in consumer rights.

In this segment, we will look at what ramifications of recently passed and currently proposed legislation will mean to us all.

And the beat goes on!

For more than 50 years, proposals for a national identification card have floated around Washington, DC. And for more than 50 years, every one of these proposals that actually made it to some type of vote in Congress went gone down to defeat. But all of that changed with the passage of the Real ID Act.

The bill, sponsored by Rep. James Sensenbrener, had been defeated as a stand alone piece of legislation. So, in a cowardly act, certain influential members of Congress allowed him to attach the bill as a rider to funding for the war in Iraq. These so called political leaders knew that Real ID would not be able to stand on its own merits but they calculated that it would be political suicide to oppose the war funding bill. They were right.

Not wanting to appear to be casting a vote against funding for the troops in the war, the bill passed both houses. The irony of this is that a number of senators, including Hillary Clinton, who voted for the funding bill proclaimed their distain for Real ID — an even more cowardly act perhaps. Where were these voices before the vote? These complaints ring hollow when one realizes that the vote in the Senate was unanimous for passage.

As a result of this vote, if the law is ever fully implemented driver’s licenses will be linked to a central database. That database will give the federal government and other states visibility into the lives of everyone in every state participating in the program. Driver’s licenses will in essence become a national ID card. Some have said they will actually be an internal passport. But the law may never be implemented in full.

Real ID gave final word on whether or not to participate in the program to the states. To be sure, the law uses a carrot and stick approach. It provides some very limited funding to some states that participate as the carrot. As the stick, it says that residents of states that don’t participate will not be able use their driver’s licenses to board planes, enter federal buildings or apply for federal benefits. But that may be more bluster than anything else.

A number of states have passed measures that make it illegal for them to participate in the program. The strongest of these measures was passed by Montana. Simply put, the state has refused to participate in any aspect of Real ID. Montana alone can’t keep the program from moving forward; largely because of the states low population. But many of the other states that have come out in opposition have much larger populations, and they serve as transportation hubs. This means that if they continue down this path, it will be virtually impossible for the federal government to move forward.

The upside of Real ID is that it would make it much more difficult for those in this country illegally to get jobs, apply for benefits or use public transportation. But the government’s claim that Real ID would stop people from coming across the border illegally is simply false. The program is more a privacy invasion and a way to monitor the movement of law abiding Americans than anything else.

Real ID is not the only legislative threat to personal privacy however. And the problem doesn’t just rest at the federal level. Fifteen states, (Alaska, Arizona, California, Kansas, Louisiana, Maryland, Michigan, Minnesota, New Mexico, North Dakota, South Carolina, South Dakota, Tennessee, Texas and Virginia) have all passed legislation requiring DNA collection at the time someone is arrested. Advocates have sold these bills as anti-crime legislation that is akin to collecting fingerprints at the time someone is arrested. But there are significant problems with these laws from both a privacy and a scientific standpoint.

When DNA collection occurs at the time of arrest, the DNA data is taken and entered into a government database. If the person arrested is eventually cleared of the crime that they were accused of, depending upon what state they are in, they may not have any right to have their DNA data removed from that database. And even if they do have such a right, it may be impossible for them to exercise it from a practical point of view.

Governments — both state and federal — have a bad habit of using the data they collect for purposes other than what it was collected for. For instance, Social Security Cards used to have a warning on them that they were not to be used for identification. Obviously, mission creep has forced the government to remove that warning. Who knows what DNA data could be used for? Are you genetically predisposed to certain diseases? Could the government make this information available to insurance companies and make you uninsurable? The laws are not written in such a way that we can answer these questions.

From a scientific point of view, these laws are also problematic. If you look at everyone alive on the planet, the odds of finding someone with exactly the same DNA you have are astronomically low. But that’s not true with the databases used for crime fighting.

DNA used in criminal cases almost always involves degraded samples. This means that all of the DNA markers used to identify someone are not actually available in the sample. And when you start dealing with partial samples of DNA, there is nearly a 100% chance that portions of your DNA match portions of someone else’s DNA

The oversight board for the FBI laboratory has recognized this issue for several years now and has been advising the FBI to inform juries about the problem. But the FBI has overridden that recommendation each time it has been made.

Now just imagine a scenario in which your DNA resides within such a database and someone with several DNA markers in common with you commits a crime. It doesn’t take a great deal of imagination to understand what kind of problems may be caused.

Good Intentions, Bad Consequences

In the recently passed economic stimulus bill was language that forces doctors and hospitals to convert medical records to electronic form over the next five years. Neither patients nor doctors have the ability to opt out of the system. President Obama claims that the reason for converting all medical records to electronic form is to cut costs in the medical system. But this utopian view ignores a number of issues.

To be sure, there will be some benefits associated with electronic medical records. If you get hurt while you are traveling, your records can easily be made available to your attending physician. And there will certainly be some cost benefits to doctors and insurers alike. But there was nothing in the legislation that forced those cost benefits to be returned to you in the form of lower fees for doctor visits or reduced insurance costs. The group that the bill was supposed to help — consumers — was actually left out of the bill’s language.

The downsides to electronic medical records are many. Nearly 600,000 people will have access to your records once they are in electronic form. These are people who work for insurers, hospitals, clinics, pharmacies and even the government — people whom you don’t know. This will certainly lead to problems such as medical identity theft; something that has already happened at a number of hospitals that already use electronic records.

Medical identity theft can cause a number of issues. It can lead to incorrect information in a medical file. If you are a victim of it, you can be held responsible for someone else’s medical bills. The burden of proof that you are a victim is on you; much the same as with other forms of identity theft. It can even make you uninsurable. For instance, if someone steals your medical identity and gets treated for cancer, no insurance company in the world is going to give you a decent insurance rate.

The stimulus bill also setup an oversight board to review the medical decisions that your doctor makes. The eventual outcome of this government run plan is going to be rationing of health care based upon cost. The language in the bill allows the government to overrule your physicians prescribed treatment in favor of lowering costs. Instead of “change you can believe in”, the bill provides “change that can kill you.”

But medical records are not the only thing that the government wants to monitor. There is currently a bill in Congress to outlaw anonymous wireless computer hotspots. HR 1076 and its companion Senate Bill S 436 would make it illegal for companies to provide free, anonymous wireless internet access. Instead, they would have to require you to setup an account and log-on every time you access the internet.

The bill also requires Internet Service Providers (ISPs) to track your internet activities and store this data for two years. The government wants to know what you are doing online. The sponsors of these bills claim that the reason for wanting access to this data is to prevent crime and terrorism. But this is broad overreach by a nosey government who could use this information for virtually anything. They are saying that because a crime might be committed, we need to monitor you. It’s like saying because your might be in a car accident, you have to mount a camcorder in your car that has to be on at all times while driving.

These two bills are just the tip of the iceberg. Both of the them will require the establishment of large central databases to store information. And these databases will become targets for hackers.

Typically stored electronic data can also be used in civil and criminal cases, without any need for a search warrant — a simple subpoena will do the trick. And if this isn’t enough for make you feel uneasy, just consider the idea that many employers now conduct background checks on their employees. When applying for a job, many companies now require applicants to sign a waiver allowing a credit check. It is foreseeable that these waivers could eventually contain language allowing a potential employer to check your internet surfing habits too.

A Bastardization of the Law

In a 1928 dissenting opinion, Supreme Court Justice Louis Brandeis wrote of “the right of privacy” that it was "the most comprehensive of rights and the right most valued by civilized men." In 1967, the Supreme Court finally agreed with him in Katz v. United States by requiring the government get a search warrant before obtaining a wire tap.

Applying that principle to the ISP bill, the government should not be able to force ISPs to trap and store your internet activity and then make those records available to the government through a simple subpoena. In Katz, the court said essentially that a suspicion of wrong doing was not enough for the government to monitor someone’s activity — to go on a witch hunt. But the ISP bill will allow just that.

Who will win this battle is unclear. If the ISP bill or similar legislation ever does become law, it is likely to wind up in the federal court system eventually. If it ever gets to the Supreme Court, it could pose some difficult questions. The Supreme Court has repeatedly affirmed that people have the right to post content to the internet anonymously. But the court has also given Congress a wide birth — much wider that the founders ever intended — to regulate.

What is clear is that while this battle rages on, the average citizen is bound to lose. While many people believe that the government should have the necessary authority to do virtually anything in the name of national security, it must always be kept in mind that no government in the history of the world has ever started spying on its citizens without eventually trying to oppress the speech and political views of the very people it claims to be protecting. The words of Benjamin Franklin ring true even today.

“Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety.”

The same can also be said of privacy.

But if you are wondering which way our politicians are leaning in this battle, look no further than the words of President Bill Clinton who said,

"We can't be so fixated on our desire to preserve the rights of ordinary Americans."

Oh, yes we can.