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MODERN ROMANS: A WARNING FOR AMERICA, BRITAIN AND ISRAEL
Chapter 14
Rising Taxes, Extravagant Spending leading to Troubled Economy
The costs of running a huge far-flung empire were truly enormous. The ever-growing government bureaucracy and the burgeoning military establishment required to put down insurrections, maintain law and order, defend against invaders and extend the Empire put an enormous stress on the Empire’s finances.
MR booklet states: “Food, supplies, weapons, new frontier posts and fortification of towns cost fantastic amounts. Extravagant and excessive spending on buildings and engineering works added to the financial load.
“It took a veritable army of officials to man and work the complicated dual supply and demands of both the government services and the military. This necessitated laying still heavier burdens of taxation upon already over-burdened people.
“There were land taxes, property taxes, occupation taxes, poll taxes, crop taxes, commercial taxes...taxes on almost everything. No stone was left unturned for revenues. [The heaviest possible burden was put on conquered peoples. No wonder the Jews violently revolted against Roman rule and oppression repeatedly.]
“There were other economic problems which aggravated the revenue problem. Rising prices, loss of money's purchasing power, the escape of the rich from taxation, the poor growing poorer, the decline of production, soil exhaustion and droughts, disease epidemics decimating provinces, peasant rebellions, brigandage, barbarian incursions and expensive wars — all violently shook and weakened the economic superstructure of the Empire.”
Though commerce and industry were important for the economy, agriculture was the mainstay. It was the chief source of wealth. Government raises revenues from sources that have the capacity to pay. Therefore, as already stated, farmers were subjected to land and crop taxes. The rich land estate holders could use cheap slave labor to farm their estates, and could even evade taxes. Because of economies of scale, they could undersell the small farmer. To stay afloat, the small farmer had to incur debt by mortgaging part of his farm. But it was a losing battle and he was forced to mortgage his entire farm. When he could no longer pay his debts, he had only two choices: either flee to the city and take up a job or become dependent on government welfare; or become a tenant farmer, or sharecropper.
The condition of slaves working in large estates was probably better than that of the tenant farmer. The covetous large estate holders often evicted the small farmer and added his land to his estate by buying the mortgage from a broker. Thus, the small farmer found it extremely difficult to compete and was squeezed out of his farm. Lower prices for food imported from conquered lands, as the Empire was a net importer, also made the small farmer uncompetitive.
"The big farmers could undersell him, both in cattle and in produce, in the market. The result was that in course of time the small, independent farmer was driven to the wall"…
"Latin literature abounds with complaints regarding this evil, which thinking men saw was sapping the vitality of the nation...The free yeoman class, that middle class which is the bone and sinew of every healthy society, was gradually being crushed out. But the protests of these enlightened citizens went for naught...The evil of land monopoly was spread over the whole Roman Empire." (James Westfall Thompson, Economic and Social History of the Middle Ages, p. 33).
"Many of the dispossessed gave up the struggle and drifted to the towns there to become dependents or clients of the rich, or to be engulfed in the increasing idle proletariat of the cities fed at public expense (the annona) and amused with the baths and the circus" (ibid., p. 32).
Americans are very familiar with this story. Small farmers gave up farming as they worked hard only to merely subsist. They could not make enough money beyond providing for the family’s basic needs. Today, only the big farming corporations who have besmirched America’s food supply with the use of genetically modified grains and use of artificial fertilizers, chemicals, pesticides and herbicides make any profit.
"Since the end of World War II, more than 20 million Americans have abandoned the countryside to take up residence in the nation's cities and suburbs. The great exodus was prompted in part by a technological revolution in agriculture which put 3 million farms out of business and 6 million farmers out of work. It also was stimulated by television, national-circulation magazines and other mass media which brought the age-old lure of city lights right into the living rooms of town and country America" (The Drovers Journal, Feb. 27, 1969).
In the early 20th century, about 50% of the U.S. population lived on farms. In 1960, 15 million people lived on farms out of a total population of 181 million. Just under 10 million Americans lived on farms in a population of over 216 million in 1975. Direct on-farm employment in 2018 accounted for about 2.6 million jobs, or 1.3 percent of U.S. employment.
Rampant Inflation
"By the third quarter of the third century the silver coins had become copper pieces washed in silver and issues of gold had virtually ceased. There was a vast inflation; by the end of the third century prices had risen to two hundred times the second-century level" (Roman Civilization, edited by J.P.V.D. Balspon, p. 73).
M. Rostovtzeff, in his book, Rome, described debasing of the currency this way: "... The emperors in their need for money issued a vast quantity of coin. Not possessing enough of the precious metals for these issues, they alloyed the gold with silver, the silver with copper, and the copper with lead, thus debasing the coinage and ruining in the end men who had once been rich. This measure cut at the root of trade and industry....The government mint in the third century became a vast manufactory of base coin" (p. 276).
Attempts were made to control inflation by the Emperor Diocletian, in the late third century by fixing prices. But the edict merely exacerbated the situation. Merchants were afraid to sell. As supply in the market decreased, prices skyrocketed. The attempt was a failure and was abandoned within five years.
The emperor’s distress at the state of the economy can be assessed from the following statement: "For, if the raging avarice...which without regard for mankind, increases and develops by leaps and bounds...almost from hour to hour, and even minute to minute, could be held in check by some regard for moderation...but...there is seen only a mad desire without control to pay no heed to the needs of many..." (Elgin Groseclose, Money and Man — A Survey of Monetary Experience, p. 43).
As far as the modern American economy is concerned, there are many parallels with the ancient Roman economy during its decline and fall. However, the situation is a little different because of the way currency and budgets are managed today.
Dollar in 1900 is worth only 3.27 cents today in terms of what it will buy. The average single American contributed 29.6% of his earnings to three taxes in 2018—income taxes, Medicare, and Social Security. American families paid an average of 24% in taxes in 2017, according to one study of BLS numbers. (https://www.thebalance.com/what-the-average-american-pays-in-taxes-4768594). In addition, Americans pay property taxes and sales taxes. There are other taxes and fees such as gas taxes and car registration fees.
The marginal income tax rates have actually come down from their highs during the Eisenhower and Kennedy years at 91-92%, because the politicians in America and Britain have found other ways to find money to spend. They simply borrow money to spend it, thus burdening future generations with the debt. From the https://www.usdebtclock.org/ website here are some stunning statistics:
U.S. national debt stands at $22.6 trillion, which is $68,643 per citizen and $183,625 per taxpayer. In addition, state and local government debt stands at $3.1 trillion. By 2023, the national debt is projected to increase to $25.6 trillion. Total unfunded liabilities stand at $126 trillion. Total U.S. unfunded liability includes Social Security (along with Medicare Parts A, B, and D), federal debt held by the public, plus federal employee and veteran benefits. These are promises made by the U.S. government to its citizens but has not set aside money to pay them. By 2023, the unfunded liabilities are projected to reach $157 trillion. In addition, total state unfunded pension liabilities currently stand at $6.8 trillion.
The Debt Clock shows that federal tax revenue stands at $3.516 trillion, whereas spending is at $4.536 trillion. This annual budget deficit of $1.02 trillion means that not only have we promised too much in the future, we can’t cover our current expenditures. Thus, we are falling behind even more every day. The national debt will simply keep piling up higher and higher.
On what programs is the federal budget spent? For FY 2019, the following is budgeted: Healthcare (Medicare/Medicaid) $1.25 trillion (28% of budget outlay); Social security/pensions $1.11 trillion (24%); Defense $0.94 trillion, (21%); Interest on national debt $390 billion (9%); welfare programs $380 billion (8%); Education $160 billion (4%). Healthcare spending is rising faster than other programs. Social security and pension programs will also increase as the baby boomer generation is reaching social security eligibility in large numbers. Defense spending is likely to continue to grow because of international threats. Because of increasing national debt, burden of interest on debt will continue to brow. Soon, the amount of the budget left for discretionary spending such as on welfare, education, protection and transportation will continue to shrink drastically, unless the budget deficit continues to increase at a faster rate.
In addition to government debt, total personal debt which includes mortgages, student loans, credit card debt, auto loans etc. stands at $20 trillion, an all-time high, which is $68,250 per person. Americans are living it up on debt. In a CareerBuilder report in 2017, about 78% of U.S. workers live from paycheck to paycheck.
The average Roman citizen too was crippled by debt. Historian William Stearns Davis in his book, The Influence of Wealth in Imperial Rome (pages 163, 164, 167): "As an almost unavoidable corollary of the huge Roman fortunes, went the accumulation of debts...Even men of grave and respectable habits caught the mania of their age, that of living beyond their incomes...The typical Roman of birth and fashion, may then be imagined as regularly in debt, and frequently on the brink of ruin.”
The Roman Empire was a net importer and had a trade deficit. This means Rome’s trading partners gained jobs at its expense. The story in A&B is much worse today. In 2018 the U.S. had a trade deficit of $621 billion. It was $554 billion in 2017. The U.S. trade deficit in goods in 2018 was $875 billion; $793 billion in 2017. In the first six months of 2019, it is already $506 billion. The U.K. had a trade deficit of $47 billion in 2018 whereas it was $31 billion in 2017.
Huge trade deficits result in net transfer of wealth and jobs to our trading partners and impoverish us to that extent.
How can the USA continue to run such huge trade deficits ‘perpetually,’ because net imports have to be ultimately paid with a foreign currency? The reason is that the U.S. dollar is the major reserve currency of the world, and the U.S. having huge trade deficits puts dollars in the hands of foreign countries which then use them as reserves in place of precious metals to back their own currencies. The U.S. can thus get away with having huge trade deficits, as other countries continue to increase their dollar holdings. Other countries then invest some of their currency reserves in U.S. government securities on which the U.S. pays them interest. Foreign countries hold $6.7 trillion in U.S. debt.
The problem for A&B is that budget deficits resulting in increase in the national debt, and trade deficits resulting in transfer of American wealth and high-paying jobs to other countries cannot continue at such unprecedented levels forever. As we continue to put more dollars in the hands of other nations who then lend them back to us at interest to finance our budget deficits, more of the budget will be allocated to entitlement programs such as healthcare, pensions and debt servicing so that very little will be available for discretionary spending. And a borrower is servant to the lender. It’s a vicious spiral that will continue to weaken our economy, whereas nations such as China, Germany, Japan and India will continue to buy more American corporations and shift production away from the USA to their countries. They can also manipulate our currency to their advantage as they hold more dollar reserves. They will hold most of the cards and will use them to continue to weaken our economy and standard of living.
Dangers of Giving Welfare
The Roman Empire was bedeviled by welfarism. As already mentioned, many small farmers dispossessed of their lands, fled to the cities and were fed at public expense and were entertained at the circuses. From time to time, from one third to one half of the population of the city of Rome was receiving charity from public funds. Other cities also faced a similar situation though not as severe. Dependence on the dole sapped the moral fiber of the nation. Once the people got used to the dole, the government could no longer cut it down for fear of major riots against the government.
A&B face the same welfare problem. Welfare benefits in the form of food stamps, temporary cash assistance and Medicaid are provided. Medicaid and Children’s Health Insurance Program (CHIP) is provided to 72 million people in the U.S. About 40 million people receive food stamps. I worked in the State of Florida, USA welfare department for more than seven years and dealt with families headed by single mothers who have been on welfare for 4 generations, ever since the program started. When the government provides all basic needs: housing, food, medical care and cash assistance, women feel no need to marry. Many in the future generation have become unemployable. A family with the mother and four children would have to earn around $60,000/year to be able to afford the benefits the government provides them free of charge. People in the tens of millions have become dependent on welfare.
The welfare state is a big part of British family life, with 20.3 million families receiving some kind of benefit (64% of all families), about 8.7 million of them pensioners. For 9.6 million families, benefits make up more than half of their income (30% of all families), around 5.3 million of them pensioners. The number of families receiving benefits will be between 1 and 2 million fewer now because of changes to child tax credits that mean some working families who previously got a small amount now get nothing. (https://www.theguardian.com/politics/2013/apr/06/welfare-britain-facts-myths).
Between 2001/02 and 2011/12, spending on "social protection" benefits – help given to those in need or at risk of hardship – increased from £156bn to £210bn.
Between 2015/16 and 2017/18, over half of families in the UK received some type of state support, such as the State Pension or Child Benefit (a family is defined as a single adult or a married or cohabiting couple, plus any dependent children) (https://www.ethnicity-facts-figures.service.gov.uk/work-pay-and-benefits/benefits/state-support/latest).
History of the Roman Empire is quite well documented. A&B are ignoring the lessons that could be learnt from that history.
H.J. Haskell writes: "...The history of the dole carries a warning...Even under the Empire it became a permanently demoralizing factor in the social and economic life. People were schooled to expect something for nothing. The failure of the old Roman virtues of self-reliance and initiative was conspicuously shown in that part of the population that was on relief. It had far wider aspects. Emergencies that would not have dismayed the men of the Republic were too much for the men of the later Empire" (H. J. Haskell, The New Deal in Old Rome — How Government in the Ancient World Tried to Deal with Modem Problems, pp. 228-229).
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