Suicide of a Superpower_Will America Survive to 2025? Page 4

  SOCIALIST AMERICA

  Like Sandburg’s “Fog,” socialism came in on little cat feet.

  In his 1938 “The Revolution Was,” Garet Garrett, who had spent his life fighting federal encroachments, began, “There are those who still think they are holding the pass against a revolution that may be coming up the road. But they are gazing in the wrong direction. The revolution is behind them. It went by in the Night of Depression, singing songs to freedom.”52

  Garrett wrote of a revolution within the form. To the world, America seemed the same country. But within, he argued, an irreversible revolution had taken place. One need only glance at where we were before the New Deal, to where we are today, to where we are headed to see how far we are off the course set by the Founding Fathers.

  Taxes drove the American Revolution, for we were a taxaphobic people who believed in severely limited government. That government governs best that governs least is an American axiom. When Coolidge left the White House in March 1929, the U.S. government was spending 3 percent of the gross national product.

  And today? Obama’s first budget consumed one-fourth of the gross domestic product. The deficit was 10 percent of GDP. Fiscal year 2010 produced a deficit of nearly equal magnitude. Obama sought to repeal the Bush tax cuts on the top two percent of earners and raise the top rate to nearly 40 percent. This does not include state and local income taxes which, in California and New York, can take another 10 or 12 percent. Nor does it include payroll taxes for Social Security and Medicare, which add up to 15.3 percent on most wages and salaries, half of it coming out of workers’ pay. The Tax Foundation estimates that New Yorkers could face a combined income tax rate of 60 percent. Added to this are sales taxes that can run to 8 percent, property taxes, gasoline taxes, excise taxes, and “sin taxes” on booze, beer, cigarettes, and, soon, hamburgers, hot dogs, and soft drinks.

  “Tax Refugees Staging Escape From New York,” ran the headline on a New York Post story that revealed that 1.5 million people had left New York State between 2000 and 2008, “the biggest out-of-state migration in the country.” Those departing Manhattan earned, on average, over $93,000 a year while those arriving earned less than $73,000.53

  A 2011 Marist poll found that 36 percent of all New Yorkers under thirty planned to leave the city within five years. Two-thirds gave high taxes as a principal reason.54

  In the Declaration of Independence, Jefferson indicted George III as a tyrant for having “erected a multitude of New Offices, and sent hither Swarms of Officers to harass our people and eat out their substance.” What did King George do with his Stamp Act or tea tax to compare with what America’s rulers are doing to Americans today?

  After receiving the IRS figures for 2007, the Tax Foundation did an analysis of who pays the U.S. income tax—and who does not.55

  Taxpayers

  Share of Income Tax Paid

  Top 1 percent

  44.42%

  Top 10 percent

  71.22%

  Top 25 percent

  86.59%

  Top 50 percent

  97.11%

  Bottom 50 Percent

  2.89%

  The hardest-working and most productive Americans are being bled, and Obama plans to increase the number of free riders. In 2007, not only did one-third of all wage earners carry none of the federal income tax load, 25 million got an Earned Income Tax Credit from the Treasury. Half the states are now sending out checks to people who pay no income taxes.56

  How large is the EITC program? Writes Edwin Rubenstein, an economic analyst formerly with Forbes and National Review:

  Since the Earned Income Tax Credit (EITC) became part of the income tax code in 1975, it has quietly become the largest cash transfer program in the United States.… EITC spending dwarfs that of the traditional welfare program … and food stamps combined.…

  From 1985 to 2006, EITC payments grew from $2.1 billion to $44.4 billion, or by an eye-popping 2,014 percent.… [T]he number of returns claiming the EITC rose from 6.4 million to 23.0 million.57

  Tax credits, paid in cash to people who pay no taxes, are welfare.

  The EITC helps explain a startling discovery. According to the Tax Policy Center, 47 percent of all wage earners in the United States would “pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability.”58 In May 2011, Congress’s Joint Committee on Taxation revised that figure—upward. Fully 51 percent of all households in the United States in 2009 had paid no federal income taxes.59 More than half the nation was now free-riding on the taxes of the other half.

  The free society has become the Entitlement Nation. Everyone is entitled to health care, housing assistance, food stamps, welfare, earned income tax credits, and a free education, from kindergarten through grade 12. And soon, college, with Obama’s promise “to put a college education within reach of every American.”60

  The whole world is coming to feast at the banquet table.

  More than a million immigrants, legal and illegal, arrive each year. They come with less education and fewer skills than U.S. citizens and consume three times as much in benefits as they pay in taxes. As most immigrants are people of color, they and their children quickly qualify for racial and ethnic preferences in hiring, promotions, and admissions.

  And as America’s richest states, California and New York, are buckling and breaking under this burden, so, too, must the United States.

  FOOD STAMP NATION

  “The lessons of history … show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fibre. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.”61

  These words about Depression-era welfare are from President Roosevelt’s 1935 State of the Union address. FDR feared that formerly self-reliant Americans might come to depend permanently upon government for the necessities of their daily lives. And, as with narcotics, such a dependency would destroy individuals’—and the nation’s—fiber and spirit.

  Seventy-five years later in 2010 came news that 41.8 million Americans were on food stamps and the White House was predicting that the number would grow to 43 million in 2011. It did: by February 2011, 44.2 million Americans, one in seven, were on food stamps. In Washington, D.C., more than a fifth of the population was receiving food stamps.62

  To chart America’s decline, the explosion in the food stamp program is a good place to begin. A harbinger of the Great Society, the Food Stamp Act was signed into law in 1964 by LBJ. Initially, $75 million was appropriated for 350,000 individuals in forty counties and three cities. Ironically, the Food Stamp Act became law half a decade after John Kenneth Galbraith in his best-seller of the same name had declared America to be the world’s “affluent society.”

  However, no one was starving in the 1960s. There had been no starvation since Jamestown, with such exceptions as the Donner Party, who were caught in the Sierra Nevada mountains in the winter of 1846–47 and who took to eating their dead.

  In May 1968, however, CBS ran “Hunger in America,” narrated by Charles Kuralt, who held up an emaciated baby, dead of starvation. Senator George McGovern was jolted and began hearings. In The Manipulators: America in the Media Age, Robert Sobel would charge CBS with deceiving the nation and exploiting a baby that had died after being born prematurely. But the documentary had given real impetus to the Great Society program. When Nixon took office in 1969, three million Americans were receiving food stamps at a cost of $270 million a year. When he left in 1974, the program was feeding sixteen million people at a cost of $4 billion a year.

  Fast forward to 2011. The cost to taxpayers of the U.S. food stamp program hit $77 billion, more than doubling in four years. First among the reasons is family disintegration. Forty-one percent of America’s children are born out of wedlock. Among black Americans it is 71 percent. Food s
tamps feed children abandoned by their fathers. Taxpayers are taking up slack for millions of deadbeat dads.

  Have food stamps made us healthier? Consider New York City: there, 1.7 million people, one in every five in the city, rely on food stamps for daily sustenance. Forty percent of the kids in the city’s public schools from kindergarten through eighth grade are overweight or obese. Among the poor who depend on food stamps, the percentage of obese children is even higher. Mothers in poverty use food stamps to buy their kids sugar-heavy soda pop, candy, and junk food. When Mayor Michael Bloomberg proposed to the U.S. Department of Agriculture that recipients not be allowed to use food stamps to buy sugar-rich soft drinks, however, he ran into resistance.

  “The world might be better … if people limited their purchases of sugared beverages,” said George Hacker, of the Center for Science in the Public Interest. “However, there are a great many ethical reasons to consider why one would not stigmatize people on food stamps.” In 2004, the Department of Agriculture denied a request by Minnesota that would have prevented the use of food stamps to buy junk food. To grant the request, said the department, would “perpetuate the myth” that food stamp users make poor shopping decisions.64 Is that a myth or the simple truth?

  What a changed country we have become. A less affluent America survived a Depression and world war without anything like 99 weeks of unemployment insurance, welfare payments, earned income tax credits, food stamps, rent supplements, government day care, school lunches, and Medicaid.

  In the past, public or private charity were thought to be necessary but were viewed as temporary fixes until the breadwinner could find work or the family could get back on its feet. The expectation was that almost everyone, with hard work and perseverance, could make his or her own way and support a family.

  This expectation has changed radically. Today we have accepted the existence of a permanent underclass of scores of millions who cannot cope and must be carried by society—fed, clothed, housed, tutored, and medicated at taxpayer’s expense their entire lives. We have a dependent nation the size of Spain in our independent America. We have a new division in our country, those who pay a double or triple fare, and those who ride forever free.

  There has been a precipitous decline in the character of our people. We are not the people our parents were. We are not even the people we used to be. FDR was right about what would happen if we did not get off the narcotic of welfare. Our country has undergone a “spiritual and moral disintegration, fundamentally destructive to the national fiber.”

  In 2010, The Education Trust gave us a glimpse into how far our young have fallen. Because they are physically unfit, have a criminal record, or have failed to complete high school, 75 percent of America’s young, ages seventeen to twenty-four, do not even qualify to take the exam to enter the army. Of recent high school graduates who do take the test, nearly one-fourth fail to get the minimum score needed to join a branch of the military, though the questions “are often basic such as, ‘If 2 plus x equals 4, what is the value of x?’”64

  HOW GOVERNMENTS STEAL

  In his The Economic Consequences of the Peace, written after the Paris conference of 1919 that produced the Treaty of Versailles, John Maynard Keynes wrote, “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” Keynes agreed:

  Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.65

  * * *

  Thinking back on what a nickel could buy years ago, and what a dollar buys today, calls to mind the insight of Lenin and Keynes. In 1952, a Coke cost a nickel as did a candy bar. Movies cost 25 cents, as did a gallon of gas or a pack of cigarettes, though you could pick up a carton for two dollars. On the Internet, a Kentucky-based retailer recently offered smokers a bargain: “Cut your smoking costs by as much as 60 percent. On an annual basis the savings are enormous. Premium Brand Name cigarettes like Camel and Marlboro as low as $43.99 per carton.”66

  Even at a 60 percent discount, cigarettes cost twenty times what they did in the 1950s. Cokes and candy bars cost ten times as much, movies thirty or forty times. Today’s four-dollar gallon of gas costs sixteen times as much. While the prices have soared and taxes help explain the cost of cigarettes and gas, what has happened is the debauching of the dollar, which has lost more than 90 percent of its purchasing power. In 1947, this writer’s father, an accountant, became a senior partner in his firm and bought a new Cadillac—for $3,200. The same car today would cost over $50,000.

  Who is guilty of this debauching of the dollar? Well, who has had custody of the currency since 1913?

  Many have felt the lash of public anger for the financial crisis that wiped out trillions in wealth and dumped us into the deepest recession since the 1930s. The Bush Republicans and Barney Frank Democrats who prodded banks into making subprime mortgages to people who could not afford the houses they were buying. Fannie and Freddie. The Wall Street banks. The AIG geniuses. Yet, the Federal Reserve, though it controls the money, and every financial crisis is a monetary crisis, has escaped indictment.

  “[T]he very people who devised the policies that produced the mess are now posing as the wise public servants who will show us the way out,” writes Thomas E. Woods Jr., whose Meltdown traced the Fed’s role in every financial crisis since the creature was spawned at a meeting on Jekyll Island, off the coast of Georgia.67

  The “forgotten depression” of 1920–21 was brought on by the Fed’s printing of money for Woodrow Wilson’s war. When, at war’s end, the Fed tightened its monetary policy, production fell 20 percent between mid-1920 and mid-1921. Why is that depression so little known? Because President Harding refused to intervene. He let businesses and banks fail and prices fall. The fever broke, and America, after slashing Wilson’s wartime tax rates, took off into the Roaring Twenties.

  Then, as Milton Friedman related in A Monetary History of the United States, which contributed to his Nobel Prize, the Fed began to expand the money supply in the mid-1920s. Cash poured into equity markets where stocks could be bought on 10 percent margin. The market soared. When the market stalled and stocks began to fall, margin calls went out. Americans ran to the banks to get their savings. Panic ensued. Banks closed by the thousands. Stock prices fell by almost 90 percent. A third of the money supply was wiped out. Thus did the Federal Reserve cause the Depression. Smoot and Hawley were framed.

  Though myth attributes the Great Depression to the innate conservatism of President Herbert Hoover, the man was no economic conservative. He abandoned laissez-faire, raised taxes, launched public works, extended emergency loans to failing businesses, and lent money to states for relief programs. Hoover did what Obama did eight decades later.

  During the 1932 campaign, Roosevelt accused Hoover of presiding over the “greatest spending administration in peacetime in all of history.” FDR’s running mate, “Cactus Jack” Garner, claimed Hoover was “leading the country down the path to socialism.”68 On taking office, however, FDR, terrified of falling prices, ordered crops destroyed, pigs slaughtered, and business cartels created to cut production and fix prices. Roosevelt mistook the consequences of depression, falling prices, for its cause. But prices were merely returning to where they belonged in a free market. The drop in prices was really the first step to a lasting cure.

  Of the Depression, Paul Krugman wrote: “What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.”69

  Krugman may have a Nobel Prize, writes Woods in Meltdown, but his analysis is a “stupefying and bizarre misunderst
anding of what actually happened.”70 Obviously, with 29 percent of the labor force conscripted into the armed forces, their jobs taken by older men, by women, and by teenagers, unemployment will fall. But how could the economy be growing 13 percent a year, as economists claim it did, when there was rationing, declining product quality, an inability to buy homes and cars, a longer work week—and shortages everywhere? How can the economy be booming when the cream of the labor force is in boot camp, on military bases, aboard ships, storming beaches, or flying planes over enemy territory?

  Ironically, it was 1946, a year the economists predicted would bring on a postwar depression because federal spending fell by two-thirds, that proved to be the biggest boom year in U.S. history. Why? The real economy was producing what people really wanted: cars, TVs, and homes. Businesses were responding to consumer desires, not to a government run by dollar-a-year men who wanted tanks, guns, ships, and planes to blow things up.

  Backing Woods up, author Robert Dell wrote in 2011:

  Between 1945 and 1947, federal spending was cut from 41.9 percent of GDP to 14.7 percent. Yet the unemployment rate over that period stayed below 3.6 percent and real GDP grew by 9.6 percent. According to [economist David] Henderson, “The postwar bust that so many Keynesians expected to happen never did.”71

  Of the financial collapse that brought on the recession of 2008–2010, Woods writes, “The Fed was the greatest single contributor.… more dollars were created between 2000 and 2007 than in the rest of the republic’s history.”72 When the Fed tightened, that bubble burst. Many argue that were it not for the independence and vision of Fed Chairman Ben Bernanke, the economy might have gone into the abyss after the Lehman Brothers collapse. But who brought us to the edge of the abyss?