July 4th Week Musings ... Government Growth, Dependency, Intrusion and Its Debilitating Impact on Our Economy and Future Prospects ... We Must Change Course

This week marks the celebration of our nation's Independence on July 4th, the beginning of our country and the world's most unique society of self governing free individuals.

{NOTE: By the way, the word 'nation' doesn't appear anywhere in the Constitution. We began as a federation of sovereign independent states and a strong centralized government was strictly not foreseen as desirable by the Founding Fathers. My how, things have changed!}

We started out with a federalist and not centralized governing system which recognizes the natural rights of people and the need to limit the powers of those in government because of the imperfections in people. We embraced such things as federalism, individual property rights, the rule of law, equal treatment under the law and the inherent rights to do and say as we choose, having been endowed by our "Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

American Exceptionalism was part of who we are from the beginning, and now it's in need of repair by We the People as a whole.

So now we need another "revolution" to take back our country and rejuvenate the values of freedom, self reliance, voluntary cooperation and enterprise in the private sphere. Perhaps most of all, we need to return to limited government.

Government growth has been swift, relentless and huge during my adulthood. Although Social Security was passed in the 1930s, the real problems with government growth and out-of-control spending didn't start there. Medicare and Medicaid were passed in the 1960s, OPEC "happened" in the 1970s and government spending has been on a roll ever since.

Some national legislation has been sorely needed, such as Civil Rights legislation in the 1960s, but most of the actions by our national government have made America weaker.

Over the past several decades, it's pretty much been government, more government and then more government, resulting is a period of devastating inflation, a weakened currency, a slow growth economy and mountains of unaffordable government related debt.

But is the America of today really all that different from many other societies which temporarily led the world over the course of history? No, not really. That's why it's time to change. Our problems are made by us and can be solved by us. The future is up to us.

How the Mighty Fall is subtitled 'The Roman empire eventually lost its economic vitality thanks to price controls, heavy taxes and state-sponsored debt relief:'

"One of the underappreciated realities of history is that most of it has been lived in relative misery. From the Paleolithic era 2.5 million years ago up to the early 19th century, average life expectancy topped out at about 35. And for much of this period, there was no such thing as economic growth—humans subsisted on what they could kill or scratch from the ground or on the proceeds of a minimal barter economy. While some civilizations outperformed others, sooner or later the standouts fell into decline. The reasons why, and the lessons for the United States, are the subject of "Balance: The Economics of Great Powers From Ancient Rome to Modern America," by Glenn Hubbard and Tim Kane.

The great powers in their story are a mix of empires (Roman, British, Spanish, Ottoman), dynasties (Ming China), countries (post-1868 Japan), regions (the European Union) and even a U.S. state (California). . . . the decline of these polities has tended to follow a template or sequence of error: "denying the internal nature of stagnation, centralizing power, and shortchanging the future to overspend on the present." When the inability to corral fiscal profligacy coincides with a breakdown of political institutions, a toxic imbalance ensues and decline follows.

Balance
By Glenn Hubbard and Tim Kane
(Simon & Schuster, 351 pages, $28)

Before the great powers could decline, of course, they had to rise. How and why they did has been the source of a long and lively debate. An abundance of labor, land and capital was once thought to be fundamental, only to be upstaged more recently by a focus on an abundance of people, ideas and things. Messrs. Hubbard and Kane argue, as do others, that certain policies and core principles are the key: property rights, flexible work rules, open markets. For the authors, such matters explain economic growth entirely.

To those who would cite the primacy of technological breakthroughs, Messrs. Hubbard and Kane assert that inventions only spark growth if there are systems in place (such as intellectual-property rights) that enable inventions to flourish and their value to spread. "The wheel and the windmill were invented many times," they write, "then forgotten, until finally one society had the institutional framework to implement them widely and pass them on permanently." In short, "institutions explain innovation."

The flip side is true as well. The failure of institutions to adapt to evolving realities brings about decline. The prosperity of Rome, the authors say, was a byproduct of material innovation (they highlight the development of concrete) and also the political kind: a professional army, federalist governance, property rights and a hostility to hereditary rule. Over time, however, Rome's rulers imposed measures that sapped the empire's vitality: price controls, heavy taxes and a ban on the free movement of rural Romans. Of no great help was the first recorded example of state-sponsored debt relief: Hadrian, as emperor, canceled the outstanding liabilities that individuals owed to the central government, going back 15 years, and had the loan records burned in a public ceremony.

Another example of a great power that rose and fell—and is now rising again—is China. From the years 400 to 1000, the authors say, it had an estimated per capita GDP of $450, a third higher than Western Europe's. It rose to $600 by 1300, thanks in part to a number of inventions, from paper making to shipbuilding. The ships, in turn, enabled an exchange of goods with people throughout Asia.

But such dynamism proved unsustainable. A version of civil war led to an erosion of China's fleet and a decline in trade voyages. That some coastal areas continued to profit from barter prompted the regime's leaders to criminalize large-boat construction in 1500 and eventually destroy all oceangoing ships. Such moves, the authors claim, were emblematic of China's turn inward and its failure to capitalize on its inventions. The result was stagnant living standards until 1800. An even more profound source of China's trouble was institutional: The Chinese emperorship "morphed into a zero-sum struggle for influence among interest groups."

"Balance" closes with an examination of the woes afflicting California—which, if a stand-alone country, would have the world's 10th largest GDP (down from fifth not long ago)—and of the woes afflicting the U.S. as a whole. Messrs. Hubbard and Kane note that California's tax climate is among the most hostile to business formation of any state in the country. And the dysfunctional political system has contributed to both crushing debt levels and an inability to do anything about them.

For America, Messrs. Hubbard and Kane see "the storm clouds of history" gathering on the horizon. The culprits are again internal: political inertia and, because of wayward policies, the erosion of economic vigor. The authors are particularly critical of the government's overspending and recommend a balanced-budget amendment to the Constitution. And yet they are optimistic. "American democracy," they write, "has proven itself more powerful than all of the skeptics' and cynics' concerns." Maybe so, but the history of economic folly that they skillfully recount in "Balance" is a timely reminder that societies that seem invincible are often anything but."

Summing Up

This is no time for pessimism about our future, but it is time for serious reflection on just what we've become and need and want to be.

What we want to leave behind for our kids, grandkids and the as yet unborn generations of future Americans.

Because what that future holds is very much up to We the People, as it always has been and always will be. Our problems come from within and not from Syria, Russia, Iran, North Korea, China, Russia or others.

The question for reflection is a simple one. Will We the People continue to look to government to solve our problems, and thereby become even more dependent on government, or will we choose instead to go down the path of individual freedom and responsibility?

We know which path the Founding Fathers chose, but we also know which road we've been traveling these past several decades. And where it's leading us.

The choice is ours. That's my take.

Thanks. Bob.