One thing to know before we begin. The book is broken up into three major parts. Part One: The Past is Prologue (Chapters #1-9) outlines the history of how we got to 14.3 trillion dollars of debt and massive budget deficits. Part Two: The Crime of the Century (Chapters #10-12) discuss the specific problems we face at the current moment regarding our budget deficits and debt. Part Three: The Plan (Chapters #13-20) outlines Glenn Beck's plan of how we can get our nation back on track to fiscal responsibility.
CITATION NOTE: Any words that are quoted are directly from the book with an appropriate page number reference. If another source is quoted from the book that is from Beck's massive amount of citations I will be sure to list it immediately after the pertinent information. Enjoy.
Chapter #1: Ancient History, Modern Lessons
We are an empire in decline because we are crumbling from the inside, and I am not talking about our infrastructure. The U.S. government and people are fighting a loosing battle against the laws of economics. Our debts, deficits, unemployment, inflation rates and other financial indicators are just the side effects of the disease that we face as a nation. "It's time to stop listening to the politicians, professors, and prognosticators and instead pay attention to the true predictor of the future: the past" (4)
WHEN IN ROME
The United States can be likened to Rome before the fall of the empire. Its financial condition is 'worse than advertised.' It has a 'broke business model.' It faces deficits in budgets, its balance pf payments, its savings--and its leadership. - David Walker (former comptroller general of the U.S., before the 2005 National Press ClubWhere does this comparison come from? It comes from examining the Edward Gibbons "The History of the Decline and Fall of the Roman Empire," released between 1776 and 1788 in six volumes. Our Founders were familiar with this book, in fact Jefferson's copy had many notes in the margins. Among the observations of Gibbons is that when people expect more from the government they fall prey to tyranny. Sound familiar to discussions taking place today? Gibbons even focuses on the education of the masses that required men to be reduced to the same level, to equalize the minds of men, where the masses must accept the interpretations of the men of learning, instead of interpreting things for themselves (Beck 5-6). But just as the incentive to learn is killed so was the incentive to work.
High taxes ate away at the incentive to work hard; sons were forced into their father's trade; people stopped innovating because it was not worth their time, effort or creativity. Roman bureaucracy exploded and by the fourth century AD less and less people worked, in fact the number of receiving benefits from the government was much larger than those paying taxes, because of the size of the tax assessments (Lactantius). This was coupled with heavy military spending that strained the producers of commodities. Citizens in the cities got more and more handouts in an method engineered by Augustus to make the people forget about their past and freedoms "in their enjoyment of plenty." (Beck 6-7)
Rome could not pay their bills and resorted to higher taxes which the government had a hard time collecting because merchants spent to much time trying to legally avoid them. To avoid the people's discontent emperors offered entertainment and other freebies to keep them "calm and docile." The government now took on massive public works projects whether necessary or successful and the massive amounts of handouts exempted the poorer citizens from having to work. This led to class warfare between the different segments of society.
There were other things that helped lead Rome into ruins but a simple equation can be found and has been replicated many times in history and is repeating itself today. "The state encroaches on freedom and demands more power. People take less responsibility for themselves and want more handouts from the government. Taxes go up to pay for the handouts. The size of government explodes and economic growth slows. The government seeks to divert the public's attention from what is really going on to 'bread and circuses.' Collapse, economic or otherwise ensues" (Beck 8). Want some more examples?
GREECE LIGHTNING!
Freedom cannot last in a crisis. Once they had economic troubles the citizens of the Greek city states turned to dictators and away from individualism. These dictators often was a noble that "took the people into partnership" (Herodotus), to be the champion for the poor, get himself a private army, and rid the nation of the other leaders to seize power. Greeks suffered from so many internal disputes, all over envy of their neighboring city's property. The Greeks only saw one way to get rich, at the expense of their neighbors: greed (Beck 9).
THE SPANISH INQUISITION
In the sixteenth century, the Spanish empire was even more powerful than Rome, but it feel prey to this the same problems of bureaucracy, power and taxes. The fall came when they consumed more than they produced and massive amounts of debt which required future revenues to pay that debt. The state had to many employees, doctors and priest but not enough businessmen. The biggest problem though was the ten percent excise tax on the transfer of all property. Spanish business men evaded the tax using clever business managers. The government than debased their currency inflating the prices on everything (Beck 9-11). The key fatal move that caused this and other economic declines, "extravagance of the government" (Reginald Trevor Davis, Spain in Decline 1621-1700 (London: McMillan, 1957)
A FLOCK OF TIMID ANIMALS
"We are an empire on the edge of chaos," as Harvard Professor Niall Ferguson as stated. How does the situation in the U.S. compare to these other examples? Problem number one: over fourteen trillion dollars of debt and rising. What are our fatal mistakes? Over centralization of power instead of true federalism has killed the entrepreneur, encouraged an attitude of entitlement, and a there is a "lack of pride in individual accomplishments" (Beck 11). Rome grew through conquest, America through business growth that is being slowed by extreme regulation and "vilification of profits" (Beck 12). Every society faces inevitably and natural challenges, but how do we respond? We can be a flock of timid animals looking to government to solve the problem as our shepherd or take hold of the problems ourselves and be our own shepherds.
History has shown us the U.S. is going down the same path as Ancient Rome, Greece and Spain. We must learn the lessons of history because "we are not immune to the laws of economics... but we have to turn the corner now" (Beck 12). We have the past to guide us and give us a idea of where to go, a plan to follow.
Unless current events, break up this series I intend to continue such summaries until the entire book is complete for your reading. Next time I will address the second chapter of the same book which deals with our Founder's view on debt. To sum it up: frugality, thrift and charity.
Questions? Comments? Concerns? Class dismissed!
Hey Adam. I'm wondering if Beck made a specific distinction regarding the point in which taxes got too high to the point of crumbling our empire? Was it the 1910's? 1950's 2000's?
ReplyDeleteWhen you look at the marginal tax rates throughout the last century we are now at one of the lowest levels. In the 1910's they were very low, then they shot up during the world wars and throughout the second half of the 20th century.
I would agree with the idea of an overextended empire, but I am uncertain about the whole taxes and government intervention angle. It seems suspicious and one sided in favor of the super rich. One could argue that with the Bush-era tax cuts that Obama helped extend might be part of the problem of the deficit and any honest discussion should include this. We've gotten to the point where repealing "tax breaks" is perceived as "raising taxes".
Maybe part of the answer is to make the billionaires pay what they used to pay and use that money for necessary domestic spending instead of giving to Afghanistan, Pakistan and droves of other countries while also maintaining a global military empire. The Iraq and Afghan Wars have blown a hole in our budget and there is no return on these investments.
Specifically in the book Beck makes no mention of what percentage rate is the tipping point. The biggest point I believe he is making is that the course that we are on, higher taxes on everyone, not just the rich are inevitable. These taxes are used to pay for people who don't necessarily contribute to society but collect a check.
ReplyDeleteKeep in mind though income taxes are new idea that was originally prohibited by the unamended Constitution. And we did just fine for 100+ years without them.
I agree marginal federal tax rates are low but you have to consider state income taxes as well when looking at tax rates.
The Bush Tax cuts were not the biggest problem that created continued deficits in the early 2000s. The Neo-Cons refused to cut spending. When Congress cut the tax rates, tax revenue increased, but they never cut spending, adding to that two wars didn't help either. Also, the surplus Bush spent is a myth. That will be dealt with later in the book.
I would agree with you we need to scale back money given to foreign nations, our military bases all over the globe. One radio host, has said we should have charged the Iraqis in oil for ridding them of their dictator and providing them with protection over the last eight years. Interesting idea to say the least.
I assume this is Joe Juliano, right?
Very good Adam. I would add a couple items to your response to the first comment.
ReplyDelete1. In the 70's, the highest tax rates were very high and that decade was a horrible economic failure.
2. In the past more American's actually paid income tax. Today, something like 47% pay no federal or state income tax.
3. Today, all of us pay more in property, sales tax and other "fees" that have increased the burden to all, including the super rich.
Yup, that's me.
ReplyDeleteI agree that we do need to reform defense and entitlement spending (they are the MAJORITY of spending) as well as reform the entire tax code so people pay their fair share. It's not just one thing that will solve the crap we're in.
I think the big problem now is that we are so divided politically that not many are willing to meet in the middle on a lot of this stuff. I really think the President is trying to be the adult in the room and be a consensus leader but until we start identifying ourselves as Americans who want to fix our country and not just political partisans who want our way, we will just keep digging ourselves deeper.
I would agree with you on a lot of what you said, reforms on the defense & entitlement spending. Beck would agree with you too, he will deal with those things in the third part of the book.
ReplyDeleteWhat do you mean by fair though in the tax code?
The President has limited authority to do anything so I think its up to us to demand these reforms. That's part of what this last election was about.
The economic reality is that we have to raise revenue and reform entitlements. A flat tax would create more certainty to our business and create more revenue. Medicare, Medicaid and Social Security need to be completely overhauled.
ReplyDeleteOtherwise, we are in a new meaning to "It's Greek to me?"