“The only thing people learn from history is that they don’t learn from history.”
This cynical, but often true, sentiment comes at a time of record government red ink in the United States. Both major political parties’ have at various times supported seemingly popular relentless war and welfare state policies. These policies ignore history. They could result in or skirt bankruptcy as happened to some of the richest nations and empires in history from Spain to Hapsburgh to the British Empire.
While our federal government always seems to be overspending, recently debt levels have been accelerating, according to non-partisan observers. For instance, the Congressional Budget Office—supposedly non-partisan although I don’t believe it is counting all the red ink—reported some $2 trillion in overspending (new debt) this year. That means the debt the government is running up is 6.2 percent of the gross domestic product. That’s versus a 3.8 percent average over the past 50 years, the CBO said. At the end of the fiscal year, it would be added to the already “official” $36 trillion debt. In just a few years, CBO warned, even greater problems loom. The official debt to GDP ratio will exceed that of the World War II years, which was about 100 percent.
The nation is on track.to reach 189 percent of debt to GDP by the year 2053, the CBO said. That means the nation’s economy would be overwhelmed by red ink and likely years before 2053.
Low taxes and a reasonable regulatory approach would help. But the country can’t just grow its way out of the problem. First and foremost, our leaders must spend less and must explain to the average voter why this is essential if we are to exit before reaching the dead end of the bankruptcy road.
There’s seems to be little understanding of these problems among the general public, which is logical as I will explain below. And this ignorance seems to disturb few of our career pols, both left and right. They are like the Bourbon kings of the France in the 18th century who merrily spent and taxed without limits just before the French Revolution of 1789. How does our hired help get away with it? It’s because one of its noxious products helps the dysfunctional spending policies to continue.
These are policies that come at a time of widespread economic and historical illiteracy at our state schools. This high-priced state funded illiteracy is what the novelist Gore Vital called “the United States of Amnesia.”
So, the recent history of our welfare/warfare state mean it is unlikely that fiscal sanctity will suddenly triumph. It is questionable that United States, with a debt actually much greater than the officially published figure of $36 trillion, will avoid the fate of the Hapsburgh and Spanish Empires as well as other reckless welfare state governments such as Weimar Republic and the United Kingdom in the 20th century unless dramatic change happens anon.
But history can be a guide back to sanity. Britain, in the late 19th century and early 20th century threw aside the Victorian fiscal policies that had produced prosperity. One of leaders of these successful policies was William Gladstone. He was one of Britain’s greatest chancellors of the exchequer and later four-time prime minister. In the mid-19th century Gladstone could give three-hour budget summations to parliament with almost no notes. He was someone unrecognizable in today’s modern welfare state.
Before the disastrous Crimean War of 1854 destroyed his plans, his goal was to abolish the income tax. It was a tax he feared that inevitably gave the government the right to pry into the citizens’ personal liberty. (Indeed, Congressional representatives who called for investigations of the IRS have often ended up facing audits as do Americans moving from high tax to low tax states). It is significant that Gladstone, in his last ministry, railed against “constructionism,” another word for socialism, and excessive military spending. Along with his disappointment that Ireland was not given home rule—a failure that led to civil war in Ireland some 20 years later in the middle of World War I—he left office a disappointed man.
DOGE is, some respects, the rebirth of some of the policies the British leader called “The Peoples William.” Gladstone was a leader who considered excessive government spending evil. He believed that every extra cent of superfluous government spending should be returned to the people. He was for tax cuts long before anyone ever heard of Supply Siders, Arthur Laffer and Andrew Mellon. (Mellon, who faced a little know depression in 1921 that he reversed with tax and spending cuts, wrote a brilliant little book in the 1920s called “Taxation. His book proved that the lower the tax rates, the more the government received in tax revenue. It seems the average pol, often calling for higher and higher taxes, is also an economic illiterate and yet he has a big part in running the store called the United States economy). Mellon and Laffer are, to some extent, the scions of Gladstone.
In the United States and just about every other modern welfare state of the last century is the opposite of the Gladstonian philosophy, including many on the right, supposedly the friends of limited government and responsible spending. Indeed, “Conservative” George Will once bragged at a Security Traders Association meeting I attended about 20 years ago that, “The Republicans were doing a better job of running the welfare state than the Democrats.” He never mentioned that the Republicans once opposed the concept of the welfare state. That is before some came to believe there were more votes in embracing rather than opposing it.
This tax and spend mentality, given that we have several Republican presidents over the last 40 years, is another reason the nation is in the middle of spending mess. Indeed, I believe the GOP, with a few exceptions, has certainly contributed to the spending mess as much as the Democrats, some of whom affirm they are socialists.
The implicit question in this series on excessive government spending is how we can return to Gladstone or to a Thomas Jefferson and his Revolution of 1800. That was the first time power peacefully passed from one party to another. Jefferson abolished some taxes and tried to carry out a policy of “the government that governed best, governed least” and that the goal of government should be to keep spending and taxes low as well as wipe out debt.
What are the policies that can change this reckless fiscal approach. Some of it is monetary policy—how much new money is printed each year—some of it is fiscal policy—how much new spending our pols authorize in each session of Congress—and some of it is culture. In the latter category is the tyranny of the status quo. The latter comes in part from a state education that is biased in favor of relentless government expansion. For instance, many pols want the mantle of the education politician. That means more and more geld to state schools. And state education, said economist Milton Friedman, was the sector most in need of privatization.
It must be changed if American culture is ever to become economically literate again. We need Friedman, the school voucher advocate, along with Jefferson and Gladstone as part of a rebirth of classical liberalism. The rebirth can do many things. But most of all it could save us from bankruptcy.
What are some remedies?
More anon.
