BUD BREWER

One Man's Opinion

WHAT WOULD GEORGE SAY?

August 15,2012: George Washington, Commander in Chief of the Continental Army, and the first President of the United States, stood down from that office in 1796 and included the following warnings in his Farewell Address (issued as a public letter in 1796). It was one of the most influential statements of republicanism. Drafted primarily by Washington himself, with help from Hamilton, it gives advice on the necessity and importance of national union, the value of the Constitution and the rule of law, the evils of political parties, and the proper virtues of a republican people. He called morality “a necessary spring of popular government”. He said, “Whatever may be conceded to the influence of refined education on minds of peculiar structure, reason and experience both forbid us to expect that national morality can prevail in exclusion of religious principle.”

Washington’s public political address warned against foreign influence in domestic affairs and American meddling in European affairs. He warned against bitter partisanship in domestic politics and called for men to move beyond partisanship and serve the common good. He warned against “permanent alliances with any portion of the foreign world”, saying the United States must concentrate primarily on American interests. He counseled friendship and commerce with all nations, but warned against involvement in European wars and entering into long-term “entangling” alliances. The address quickly set American values regarding foreign affairs.

Having spent the better part of 12 hours listening to the Audio book, “1776” during a recent automobile trip to Los Angeles, I couldn’t help but feel warmth, deep pride and admiration for General Washington’s leadership and the courage of his troops fighting the British in New York and New Jersey during the Revolutionary War leading up to that famous night when he led his army in a crossing of the Delaware River and surprise attack on British regulars encamped in the city of Trenton, New Jersey. Washington’s crossing of the Delaware River, which occurred on the night of December 25–26, 1776, was the first offensive move in a surprise attack organized by George Washington against the Hessian forces in Trenton, New Jersey on the morning following the crossing. Planned in partial secrecy, Washington led a column of Continental Army troops across the icy Delaware River in a logistically challenging and dangerous operation. Other planned crossings in support of the operation were either called off or ineffective, but this did not prevent Washington from surprising and defeating the troops of Johann Rall quartered in Trenton. The army then crossed the river back to Pennsylvania, this time burdened by prisoners and military stores taken as a result of the battle. It was this battle that established the path to America’s eventual freedom and conclusion of the Revolutionary War. It laid the foundation for our Nation’s embracement of Jefferson’s Declaration of Independence referring to certain unalienable Rights among which are Life, Liberty and the “Pursuit” of Happiness.

I emphasized the word Pursuit of Happiness because while this was clearly understood by Americans at the time of that war, the right to pursue happiness has evolved into a condition where an increasing number of our citizens believe that they have a right to happiness whether they do the pursuit or not. The word entitlement has replaced the word pursuit and the phase now reads something like our citizens have “unalienable rights of entitlement to happiness”. I wonder what George would say if he were able to see how the country he led has changed over the past 240 years. He certainly would be amazed at the amount of wealth and industrial evolution, but I wonder how he would judge the changes in morality!

The American society seems to be moving from a nation where the citizens admire individual achievement to a nation that believes achievement is not a personal or proprietary value but it is merely a benefit resulting from a God given talent or skill and the awards therefor really belong to society as a whole. The manner in which our governments have responded to this seeming desire on the part of many to rebalance the individual possession of wealth is through modest to sharply progressive tax policy and more generous government entitlements. Although I believe this to be a flawed economic concept, it is becomming dogma in the minds of a larger and larger number of our citizens both liberal and moderately conservative. In their minds it is the government’s role to prevent unhappiness among the least of us and provide huge entitlements to the majority by redistributing the disproportionate wealth or achievements possessed by relatively small portion of the society. This is well exemplified by the Affordable Health Care Act of 2010 “Obamacare”, or Medicare/Medicaid, Social Security benefits and by the belief of some in the Obama Administration that unemployment should be subsidized almost indefinitely. There is even a view running throughout government that if you buy a home and borrow money to finance it, you should not be responsible for repayment of that mortgage note in accord with its terms but should expect either the lender or the government will subsidize any shortfall in the fullment of your loan and monthly payment obligations due to changes in market conditions.

This entitlement mentality is threatening the capitalistic based system of the American economy. Over the last 200 years. this free market system has rewarded visionaries and individuals willing to take risks. It has enabled investors in business groups or corporate form to exploit their ideas or opportunities to create beneficial new and better products or services and market them all over the world. The side effect of this has been to create the world’s largest consumer economy in which citizens, granted multiple education and training opportunities, experienced higher and higher standards of living. But in the last 40 years the consumer has borrowed increasingly from their future earnings leveraging their rising standard of living. Saving a part of earnings to provide back up to possible needs could be ignored since the government was increasingly providing emergency or potential unplanned expenditures for them. With rising leverage comes increasing risk and in 2007-8 this consumer based economy, supported by a platform of entitlements, collapsed.

In 1930-1940 government spending as a percent of Gross Domestic Product doubled from 10% to 20% and this included all the of New Deal Programs. Of course during World War II the percentage rose to 50% as we had a total mobilization of the economy to win the war. From 1946 to the present, government spending as a share of GDP has risen from 20% to 45% of a larger and larger GDP. Currently over 40% of that spending is funded by increased Federal Debt. Some estimates of the sum of vested and inplace government entitlements are in excess of $50 Trillion or over 3-4 times our GDP. This has the makings of a severe problem for future generations and for the continuation of a free society. Forty percent of the annual capital needed to fund government spending requires borrowing $2.5 Trillion dollars from our institutions, individuals and sovereign nations around the world. As the debt to carry our rising entitlement society grows, the need to take more from the private sector to pay for these government services requires increasing tax revenue. Except for a narrow segment of the economy that deals with hi technology and the products thereof, there is a slowing or perhaps stagnation in industrial consumer output, particularly that oriented for the consumer. As a result, economic growth is tepid and demand for unemployment benefits are increasing . As said, we are largely a consumer based economy and the more you take from the consumer the less they consume so business and employment decline in an ever increasing spiral. The entitlements resulting from this developing scenario will require ever increasing tax revenue which makes the prospective growth in the private sector even more difficult.

The question now is: Will a Romney Administration do anything significantly different? They talk as if they will but then they turn around and say they are not going to make any major changes to the entitlement structure and they are proposing tax reform that is confusing. The key factor in reversing the course of events is to start telling the American people the truth and provide a spirited leadership with the intention of helping people and the business community adjust to reality, to inspire them to become realistic about what changes they are going to have to make regarding their expectations for personal responsibility. A new more simple and broad tax reform will be necessary to get the country back on track, one with the potential of reducing debt. It will be painful but it can be done if everyone participates. Can we expect a Romney-Ryan led Administration to do the job? I certainly hope so. Our future Life, Liberty and the Pursuit of Happiness depends upon it.

One Man’s Opinion. Bud Brewer



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