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Sam’s Addiction

(SPECIAL TO THE CALDWELL JOURNAL by Dan B. Rundquist)…We have a relative named Sam. Sam’s a pretty good guy and most folks like him fine. But how Sam mismanages his finances has us all very worried. Sam has done pretty well for himself and has enjoyed a 68% raise in his gross income since 2000. The boss must like him because most of us are lucky to see a 1% or 2% raise every few years if at all. But Sam unfortunately has a spending problem. The bad news for Sam is that his total debt is about seven times his income—and while he can manage it for now, he has no intentions of ever paying it off. Like a reckless addict out of control, he has run up his debt by a whopping 127% in the past 16 years and he continues to spend 120% of his income every week. He recently bought a post-hurricane timeshare in Texas and will probably buy another one in Florida soon. With virtually no savings to his name, Sam is clearly headed for bankruptcy at some point.

Our relative Sam needs professional help. He needs an intervention to save him from himself. As his family, we are at our wits end to know how best to help him. We have written to him, called him, even yelled at him at times. In November, last year the family voted to send some friends of ours over to his house to help get him straightened out, but he is clearly stuck in his financially reckless ways and refuses to change. It’s become clear through all of this that while we support Sam, he cares nothing about his family or what we are going through on his behalf. We have our own lives to lead, businesses to run, families, and goals of our own that we need to spend our time on—and yet we are pulled again and again into Sam’s self-inflicted financial dramas. It is selfish, wrong, and unfair for Sam to treat his family this way, but I fear that we have become mere “enablers” who unwittingly support his bad habits each and every time we try to help.

Sam, however, is not a person—he is better known to you as Uncle Sam, our federal government. Because Americans are responsible to pay all Uncle Sam’s spending obligations, it is us who are really the ones now hurting financially. A new report released by the Bureau of Labor Statistics shows that for 2016 Americans spent on average more for taxes than for all their food and clothing combined. was first to report that the overall average American’s tax bill rose some 41% just since 2013. That figure does not include monetary inflation, (or the planned decline in value of the U.S. dollar measured by the fewer goods and services it will buy) which is also a hidden tax levied by the government. It is not surprising then that according the Federal Reserve, total personal debt has increased 123% since 2000 with American citizens on average now each owing a total of $56,384. Add stagnant wages and nearly zero or net negative earnings on our bank savings, and it is clear that Americans are simply being erased economically. There indeed has been an economic war waged against Americans, and we are losing. This is no accident, and history can tell us how and why.

We are now hearing banter out of Washington about tax reform and the national debt, which recently topped twenty trillion dollars. The United States, however, is not the only global superpower to ever have a “tax and spend” or, more properly stated, “spend and tax” problem. We know that overspending was a primary contributor in the final “fall of Rome” in A.D. 427. Its successor, the Eastern Empire or Byzantium (founded by Constantine the Great) later suffered the same problems. Some of the best examples of these financial abuses occurred under Byzantine emperor Justinian, who reigned from A.D. 527 – 565. He inherited an empire on good financial footing, and squandered it all. After his death, contemporary historian Procopius noted, “[Justinian] had no scruples about appropriating other people’s property, and did not even think any excuse necessary, legal, or illegal, for confiscating what did not belong to him. And when it was his, he was more than ready to squander it in insane display, or give it as an unnecessary bribe to the barbarians. In short, he neither held on to any money himself nor let anyone else keep any; as if his reason were not avarice, but jealousy of those who had riches. Driving all the wealth from the country of the Romans in this manner, he became the cause of universal poverty.”

Later still, from the period 1025 to 1081, it is not surprising that the Byzantines saw another period of decline and weakness from the former apex of their state. Much of this was also due to the fantastic rates of spending that was occurring. While then Emperor Basil II was rather modest in his expenditures, his relatives were not. His own brother, his niece, Zoe, and her husband, Constantine IX were well known for their incredible expenditures on “extravagant vagaries and whims, such as rebuilding the Church of St. George the Martyr and then altering the whole plan and rebuilding it yet again on a fantastically magnificent scale.”

Byzantine historian Michael Psellus observed that, “Gold flowed from the public treasury like a stream bubbling up from inexhaustible springs.”

America has had a similar experience with now Justinian-style confiscatory taxation and our “inexhaustible spring” which is more like a tidal wave with the national debt more than doubling from $9 trillion to over $20 trillion in just a few years. Our rates of taxation are now the highest in the developed world—and even at those confiscatory rates, our irresponsible government still goes further into debt every year.

This was all set into motion for America at our Founding. We just never learned from the mistakes of the Romans and the Byzantines. While the government was being formed, and framed, the concept of limited government (which naturally translates to limited spending) and states’ rights never sat well with elites like Alexander Hamilton, who wished to have a system of government that could use the public treasury to drive the economy. If George Washington is considered the Father of our Nation, then Hamilton could rightly be called the Father of the National Debt.

The new American central government proposed by the so-called Federalists in 1787 was pushed to the exclusion of all other proposals and would have the power to lay and collect taxes, among other things. It was an ambitious hustle. The raising of revenue was on Madison’s mind when he wrote to Edmund Randolph a few months prior to the convention, “Our situation is becoming every day more and more critical. No money comes into the federal treasury; no respect is paid to the federal authority.”

My descriptions of the events may tend to cast Hamilton in a bad light, and that is intentional. My issues with him are that of his apparent ambitious and arrogant bullying of the delegates of 1787, his insistence on an all-powerful central government which he favored from the start, his desire to use tax revenues for driving markets, and his promotion of a central banking system and national debt. All of these things have heavily contributed to the disaster we have today. Hamilton even mocks his detractors of his plan for an all-powerful government. He cites the “necessary and proper” clauses in the proposed Constitution and then states: “These two clauses have been the source of much virulent invective and petulant declamation against the proposed Constitution. They have been held up to the people in all the exaggerated colours of misrepresentation as the pernicious engines by which their local governments were to be destroyed and their liberties exterminated…”

Yes, those darn petulant people wanting to protect their liberty. How annoying. Remember that at this time, the draft Constitution Hamilton wanted did not contain the Bill of Rights—that came later in the debate.

To be fair, when Alexander Hamilton makes his argument for a strong Federal Government with taxing authority, it is important to understand the context of the day. While Hamilton and Madison were both very concerned about the lack of tax revenues and wanted their new federal government to possess “the power of creating new funds upon new objects of taxation, by its own authority, [which] would enable the national government to borrow as far as its necessities might require,” it was somewhat warranted.

No one knew the reality of the effects of this dearth of revenue better than General George Washington and men such as our friend Private Joseph Plumb Martin, who suffered in the service to their nation without food, clothing, supplies, shelter, or medical care. They were prosecuting a war on less than a shoestring budget. In fact, they had neither shoes nor shoestrings.

The illustrations of the lack of food, clothing, and supplies for the American Continental Army are not difficult to discover and are so numerous they could be condensed into a book all their own, as this request from Major General Anthony Wayne to Robert Morris, regarding the Pennsylvania Regiments under his command: “In a word their Naked & Distressed Condition Beggars all Description, and calls for the most Speedy & Effectual Exertions to render their Situation tolerable. It’s not without much pain that I have been Constrained to give you the State of facts, I must therefore Request you as you Regard the Welfare of the Penny and the Reputation of its arms, to exert every power in Obtaining an Elegant & Complete Uniform for our Troops… at present we look like Jail Birds.”

One man who also had a personal stake in the issue of raising taxes was South Carolina merchant Robert Morris. Time and again we see Morris paying for government expenditures from his own money when the government’s treasury was found empty. He is thought of by historians today as “the financier of the American Revolution.” So, the point here is that there were legitimate reasons at the time for Hamilton and Madison to be alarmed and push aggressively for policies to bring in tax revenues to cover expenses.

Madison seemed to sense with urgency that the window of political opportunity for establishing his vision for an all-powerful federal authority was fleeting. Something had to be done and quickly. Madison understood, as many of the other Framers that the Revolutionary War might not have been successful without the financial support of Robert Morris, and that Morris could not fund the new government himself, so taxation would soon be necessary.

However, Madison and his fellow Federalists would surely be surprised and alarmed to learn how high the effective rate of taxation is today in America, with its many layers, serial taxation, property tax, and excise taxes, and so on. Their system has grown into a monster.

Incredibly and inexcusably too many of our elected representatives believe as Rep. Nancy Pelosi (D-CA) does when she recently commented, “[It’s] almost a false argument to say we have a spending problem.” We may today conclude that Mr. Hamilton was largely wrong and his detractors who he said used “virulent invective” against his plans were indeed correct. The American government has supersized itself to the point where Americans can no longer afford it. It is clear now that we continue to fund it at our own personal financial peril. Reform must be the order of the day, just as it was in 1787. Because we have ignored the mistakes shown to us by history, Americans are right back where we started.