Thursday, August 4, 2011

Broke - Part 1: The Past is Prologue

This book MUST be read. It lays out the mess America is in in clear, entertaining language. He not only diagnosis the problem, he goes to the root of how we got here, and he advocates policies to fix it. Unfortunately, I came away quite depressed and hopeless. I actually believe now that we are past the point of return. We have gotten ourselves so far from where we should be, I cannot see how we can undo this mess. Americans are already in an entitlement mindset and politicians are willing to buy whatever votes they need to stay in power. There is no one and nothing that will be able to muster the power it will require to restore us to wholeness and sanity.

Beck begins with a history of America and its deficit/debt cycles. Loving history as I do, this hooked me right away. He begins with the rise and fall of the Roman Empire, Greek Empire and Spain. Time and again, the lesson is: frugal government, frugal people; extravagant government, enslaved people. Frugal used to define the American character. Frugality and living within our means allowed us to save and invest and have reserves to help others through tough times. People now follow the example of our government and spend themselves into unsustainable levels of debt that leave us begging the also broke powers that be for handouts. None of these empires that overstretched their duties and budgets fell in a day. The over taxation and enslavement of the people happened gradually. Our Founding Fathers recognized early on that debt equaled taxes and enslavement. We have been blessed with the opportunity to look back on them and learn from them. Can we do it? Can we turn the corner before it's too late?

Although our country has pretty much always run a deficit and had a debt, it was always important to presidents of both parties to work on paying down the debt. Usually debt was run up in times of war and paid off in times of peace. Enter Woodrow Wilson. Not only was Wilson our first Progressive president and a bigot, but "in the tradition of academic leftists, Woodrow Wilson was a supreme narcissist, a man convinced that he was of a superior stock and creed than others. A man with a severe God-complex." He wanted to expand the social welfare state and knew that in order to achieve his utopian vision, Americans must abandon their "blind devotion to the Constitution." Beck further states, "Unfortunately, progressive policies don't last for four or eight years -- they last forever. The income tax and new federal programs were stitched into our fabric, and they couldn't be removed easily... After eight years of Woodrow Wilson's hyper-elitist, progressive social engineering, the Social gospel's seductions had done what thy were designed to do: take power from individuals and hand it over to the planners who were supposedly smarter, more enlightened, and more compassionate organizers of life for the masses. Worse, the idea that the Constitution was outdated and needed constant reinterpretation had produced a new intellectual spawn, the idea of a 'Living Constitution,' with tenets that are malleable and subjective."

While Wilson was followed by more conservative presidents who sought to return us to our founding principles (three presidents "worked for" Andrew Mellon, the astute Treasury Secretary), eventually came the crash of '29 and the engineer president, Herbert Hoover. Ever the tinkerer, Hoover believed he needed to intervene in the economy in ways the federal government had not done previously. He was then followed by FDR who doubled-down on Hoovers policies, despite running against them and promising to... balance the budget! FDR turned to the British economist, John Maynard Keynes, for the ammunition he needed to finally wrest Americans away from their previous value of thrift and frugality, and get them to accept and desire a more activist and spendthrift government. Henry Hazlitt captured Keynes's philosophy when he said, "How marvelous is the Keynesian world! The more you spend the more you [have]. The more you eat your cake, the more cake [to eat]." To enable the unlimited printing of money, FDR took the country off the gold standard, paving the way to runaway inflation and the devaluing of the dollar.

FDR's disciple, LBJ, took up the mantle in the 1960s. Similar to the bigoted Wilson, Johnson also believed himself above not only blacks, but the whole world. He stated, "If only I could take the next step and become dictator of the whole world, then I could really make things happen. Every hungry person would be fed, every ignorant child educated, every jobless man employed." He brilliantly tied welfare and poverty programs to civil rights. Despite his obvious racism, he was able to secure the black vote for Democrats to this day. His desire to enter the history books much like his mentor FDR, led to the creation of The Great Society and the resulting massive government expenditures. Ronald Regan's assessment of the War on Poverty? Poverty won. And from the ridiculous debt we have to show for it, we not only made the poor poorer by encouraging the exact wrong ethic of accepting handouts, but we made sll of America poorer for the conceivable future.

Unfortunately the next batch of presidents did not do much better. Reagan's record is mixed. His pro-growth policies were a boom to the economy and tax revenues rose as the economy roared back to life, but spending rose as well and cuts never materialized. He ultimately brought down the Soviet Union with his military buildup, but left a huge bill for it. The Bushes and Clinton also have mixed records. Then came Obama. His record is not mixed at all. He has done nothing to promote growth and everything to promote more government spending. He now sits at the helm of a desperately listing ship of state.

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