Emperor – what are you talking about? Our Constitution doesn’t recognize that title! Who in the Unites States of America would even think of using that title to describe himself? This could certainly not be someone born and raised in this great country of ours using that title! The beginning of Richard Freer's article which follows starts out with a fable. That means that part is supposed to be fiction, but as you read do you start to see real similarities with what is going on in the real world? Maybe the only fiction is the actual title.
By Robert E. Freer, Jr., President of The Free Enterprise Foundation
The more we drift toward a socialist/fascist state, with the government grabbing a larger share of our dwindling GDP, the more we allow government bureaucrats to decide who shall produce what for whom. Such power is inherently corrupting. The results are always bad. (Alan Reynolds, Cato Inst.)
A Fable: The emperor surveyed the land and it was good- just enough trouble to tweak his restless intelligence. His people had overspent on parties and gee-gaws, and the Royal Carriage Works in Baroness Granthemost’s and Duke Levin’s Duchy was on the cusp of collapse. But, not to worry; he was so smart. “We will bail them out with the purse of the realm. It just takes a little figuring, and all will be fine. It has to be. My best archers are from Levin’s duchy. If I do not solve their plight, can I hold my throne?”
He doubted it. They had won him his throne in the first place and would slip away at the first inducement from the Duke of Sanford to bring their skills to sunny Sanford and the laid back lifestyle of the South.
“I am smarter than anyone else” said the emperor. “There is nothing to worry about.” Soon thereafter he was beset by the Royal Bankers who did not wish to help bail out the carriage works unless someone helped them to take care of their losses on the last program that the empire had required them to support: houses for millions who had not a prayer of being able to pay for them in the first place.
“Not a problem” said He. “The people’s taxes will support them in the refinancing of the houses to those very same citizens. Thanks to Royal Aid, they can afford them in style. They can stay right where they are. Everyone will be happy.”
“But, Your Highness, proclaimed his Chamberlain, only half the people pay taxes, and even now there aren’t enough of the rich to cover the cost of the national health dispensary, the Royal Archers, The Royal Road Engineers and our debts to the Eastern Kingdoms let alone all the new programs.”
“Nonsense, the rich can always afford to pay more taxes. It is their patriotic duty to do so.”
”Your majesty, we have run out of rich who can pay for our poor, and the poor grow more numerous each day. Our most talented are leaving for foreign lands, and the expenses to maintain the rest make them not so productive. Their wares remain on the shelf. What will we do?
“Nonsense, nonsense; All is well because I say it is. Tomorrow is another day. Off with your head!”
I am sure you can write the ending to that tale. My colleague in commonsense, Bill Woolsey has called your attention to just how dependent we in the United States are to the willingness of foreigners to buy our debt. At present one dollar of every four in our debt is owed to non U.S. parties. That means that a program we have already committed to that will raise our debt from eight trillion to over fourteen trillion dollars by the end of the coming fiscal year will expect foreigners to buy at least a minimum of 1.5 Trillion dollars of additional U.S obligations. Nothing of that size has ever been contemplated let alone tried.
As David Goldman of CNN Money recently reported, “Some investors have expressed concern that the huge increase in spending will drive inflation up and the value of their bond holdings lower.” Chinese Premier Wen Jiabao, for one, has expressed his concern that the mammoth amounts of Treasury debt his country holds will deteriorate in value as the U.S. deficit increases. “China owns nearly $740 billion of U.S. debt, more than 6% of the $10.9 trillion of U.S. debt outstanding,” according to our Treasury Department’s International Capital report.
According to Cabot Money Management, if the financial markets begin to recover, the Chinese are concerned about a disorderly loss of value as interest rates rise and bond face value falls. If stocks begin to recover, investors may look to sell off low-yielding government bonds in favor of stocks that have the potential for higher rewards. But as bond prices fall and yields rise, the value of Treasury holdings would fall. To exacerbate our internal imbalances, we continue to import half a billion more every month than we export.
Off with my head is often the reaction I get even from some in my own family when I seek to call attention to this fundamental structural problem in the national purse. What I hear is “It didn’t happen today. You cannot tell me it will happen tomorrow, and it is too big for me to understand; so. I won’t worry about it” It is ludicrous that Maria Bartilomo is celebrating a modest stock rally, speculating the worst is behind us as we travel ever deeper into the Dragon’s lair of financial catastrophe.
Heritage Foundation, using CBO figures back in 2005 calculated a fifty seven percent federal expenditure of GDP, representing a then $11,000 per household increase in federal taxes. Heritage notes, “Beginning in 2025, just a small interest rate response would push federal spending to forty four percent of GDP by 2040 and seventy three percent by 2050- levels twice as high as previous projections.” ……And that was before the present debacle.
My colleague spins his own nightmare scenarios, while I compound your fear with expectation of the unanticipated event. It will be a different event, but it could be as simple as the current sparking event, the realization that the supposed security underpinning debt swaps that have so leveraged the banking houses we allowed to become too big, might not be as secure as we supposed, or it might be a Russian attack on Georgia or Ukraine, Israel attack of Iran setting off general warfare in The Mideast with consequent interruption in fuel to the West. It could see Pakistan and India in a nuclear exchange, or it could be a true pandemic. It could be almost any little unexpected event that tips the economic fault lines, and the earth’s economies will shake into free fall.
Maybe it is better that the public remain uninformed. If they really realized how vulnerable we are, they would be so frightened; it would bring about the very event I foresee. What can we do? Is it all but inevitable? Well, it is clear that we cannot get out of this mess without pain distributed to all, not just the 50 percent of the electorate paying virtually all our taxes.
A year ago I predicted a VAT or General National Sales tax in 2010. I still expect it will be a refundable VAT, and feel certain that up in the Legislative Reference Service on Capitol Hill or among Ways and Means staffers, someone is quietly working on modules to graft to existing modules of such a legislative approach. I also expect we are facing the need for a National Welfare Bond Drive unlike any we have seen since World War II to float us through the challenge, and though I decry the practices that brought us to this pass, all of us need to support that effort with our whole hearts and our wallets as our contribution to our children and theirs.
As for the business community, it is probably useless to lobby the existing Congress. We are in the mess fully now. The greatest contribution business can make is to invest in a series of entertaining shows that are massively distributed for all audiences from primary school to college age and beyond that explain our economic system as the companion to the story of our great country’s founding in liberty.
Show them that as we lose our economic freedom, we lose our other liberties as well. Free enterprise and liberty are totally interdependent. Lose one, you lose the other. Only a massive educational effort by those of us who understand what we are well on our way to losing can pave the way for our emergence from the dark tunnel into which we have entered. If not us, who, and if not now, is there any hope that the light of liberty ever will be returned to its sacred place at the tunnel’s end?
Copyright © 2009 by Robert E. Freer, Jr. All rights reserved
About the author: Robert E. Freer, Jr. is President of The Free Enterprise Foundation. He is a Visiting Professor, at The Citadel and elected in 2005 to be their first John S. Grinalds Leader in Residence. A regular contributor to the Mercury, He can be reached by E-mail at The Citadel . Copies of his earlier columns can be found The Free Enterprise Foundation.
This article may be republished unedited in its entirety provided that copyright statement and author by-lines are kept intact and unchanged and hyperlinks and/or URLs provided by the author remain active.
If you’d like to contribute an article to this collection please e-mail it for review .
Go to 2009 Business Ethics Articles from The Emperor