I.O.U.S.A - Addison Wiggin [123]
The threats are the unfunded liabilities of Social Security, Medicare, Medicaid, which account for tens of trillions of dollars, about eight to ten times the size of the national debt. That fact doesn ’ t show up on the politicians ’ balance sheet. They don ’ t want you to know what a mess they ’ ve created. If you had those kind of liabilities in the private sector, you ’ d be joining the ranks of Enron, marching off to whatever facility where you will be a guest of the state. That is the real problem. I believe that we can deal with Social Security and with the problems of healthcare, but that is where the real debt is and that ’ s what the politicians don ’ t want us to talk about.
Q: Looking back at twentieth - century America, can you point to some of pivotal moments when the United States government ’ s monetary policy created this sort of economic mess?
Steve Forbes: I think the real turning point was probably the Great Depression. When you have warfare, the power of the government expands, government borrowings go up, and you always get hit with infl ation. But up to the 1930s, the government geared back after a confl ict. This happened after the Civil War.
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For example, the income tax was enacted during the Civil War, but was repealed a few years later. World War I racked up a lot of debt, but in the 1920s we reduced it by a third and lowered tax rates. It ’ s hard to believe, but in the early ‘ 20s the highest wartime tax rate was 77 percent. Then it was cut down to 25 percent. As you can see, we were still in the tradition of gearing back.
Then came the Great Depression. At the time, nobody knew why it happened. It was seen as a failure of free enterprise. The government thought the best way to recover from this disaster was the way they had historically done it after wartime. And so with Herbert Hoover ’ s administration and later with the New Deal, the government assumed new powers to try to correct the fl aws of private enterprise. This is when we had the rise of the alphabet agencies. Then, in the late 1930s, the New Deal sputtered to a halt. It clearly wasn ’ t pulling us out of the Depression. But just as soon as it looked like this period was going to end, the Second World War broke out, accompanied by another ratcheting up of government powers. As soon as it looked like the turmoil that was caused by the Second World War was going to end, we had the Cold War. During this period, everything was done for national security. Even the interstate highway bill of the mid - 1950s, which established and eventually built 40,000 miles of freeways around the country, was done in the name of national security.
Education reforms were also established for national security (the government believed we needed more scientists).
So, as a result of this constant warfare we ’ ve had to fi ght — hot wars, Cold War, and the war against Islamic extremism —
government powers have always gone up. And I think what the real challenge for the United States now is to show that we can fi ght these forces that threaten our basic freedoms, while simultaneously preserving our freedoms from excessive government involvement. No other states, no other nation, no other republic, no other empire ’ s been able to do it. I think that ’ s the challenge that we face. I think we ’ ve got to show ourselves and the world that a free people can defend their freedoms. We cannot give up more sovereignty to government bureaucracies.
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Interviews
Q: Given your experiences with the political system, what type of leadership would it take to put the hard choices in front of the American people? As you said, after a war we should know that we must cut spending a little bit and reduce government involvement. Yet that doesn ’ t seem to ever happen. There always seems to be a reason why the government needs to spend more. We ’ ve heard