Is This The End of the American Century?

This site features updates, analysis, discussion and comments related to the theme of my book published by Rowman & Littlefield in 2008 (hardbound) and 2009 (paperbound).

The Book

The End of the American Century documents the interrelated dimensions of American social, economic, political and international decline, marking the end of a period of economic affluence and world dominance that began with World War II. The war on terror and the Iraq War exacerbated American domestic weakness and malaise, and its image and stature in the world community. Dynamic economic and political powers like China and the European Union are steadily challenging and eroding US global influence. This global shift will require substantial adjustments for U.S. citizens and leaders alike.

Monday, January 12, 2009

This Is Not the Time To Cut Taxes

My op-ed piece, "This is not the time to cut taxes: To increase federal revenue, taxes must go up, not down," appears in the 1/13/09 issue of The Christian Science Monitor, accessed at the link above. There I write that

"talk of tax cuts may be music to the ears of American taxpayers and a nod to satisfy Republicans but they make no sense in a time of soaring budget deficits and huge new government expenditures, including the probability of $1 trillion for Obama's proposed economic stimulus plan."

I conclude the article with these thoughts:
"Obama should allow the Bush tax cuts to expire at the end of next year, for everyone except the very needy. He should also raise the marginal tax rates for the very wealthy. These rates are very low by both historical and international standards. Increased taxes will be unwelcome and painful, but the US is in a situation as unprecedented and dangerous as that of the Great Depression. Obama himself has called on Americans for sacrifice. And after two decades of bingeing, we can afford a little sacrifice."

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David S. Mason said...

Thomas Lecoq emailed me this comment on my Christian Science Monitor op-ed:
Dear Dr. Mason:

I respectfully disagree with your editorial comments regarding the need
to increase tax rates. As a journalist by training and a former
business writer, my experience is that government is astonishingly
inefficient and that politicians are spendthrifts who have made economic
rules and decisions that led directly to the economic meltdown with
which we are now wrestling.

To look to government to resolve the situation they caused by doing more
of what triggered the problem in the first place seems
counterproductive. In the end, only the market will work this out.
Adding to debt, making the government the institution of last resort for
all our institutions and business can only be expected to fail and
probably to prolong the misery.

There have been substantial increases in taxes already, for example
increasing the cutoff point for self employment taxes. Your assertion
that the U.S. tax rates are lower than most developed countries misses
the point that most of those countries are suffering more severe
downturns than the U.S. Countries that have lowered their tax rates for
business have attracted many companies and entrepreneurs, Ireland for

Many of the state and municipal entities you describe as unable to meet
unemployment demands, have been so careless in their spending and
budgeting that they have gigantic unfunded retirement liabilities.
According to recent figures I've seen, many government entities are
paying something like 43 percent higher salaries than pay for comparable
work in the private sector. It is quite clear that this is the result
of politicians and education management bending over backwards to please
public employee unions--whose support and donations are the mothers milk
that feed union-friendly political careers.

As a former reporter and consultant for 28 years, I find it astonishing
that anyone believes that government can resolve any significant
problem. Peter Drucker once wrote that government was good at only two
things, inflating the currency and making war. In the second edition,
he revised that because it was clear that government was not capable of
making war.

All small business people I know are busy finding ways to beat the
downturn by increasing efficiency, cutting costs and laying people off.
Their response to the threat of increased taxes is more of the same.
Hiring 4 million people to fix infrastructure appears to be one solution
to joblessness, but it can only lead to further debasement of the
currency (inflation) and destruction of the value of savings and
investment. A recent Forbes article said the only solution they could
see to the inevitability of tax increases was to work harder, for more
years and conserve resources through wise investment. That doesn't
sound very appetizing to me.

The biggest problem I see with the solution you suggest is that it is
enforceable only by increasing government's coercive powers, a solution
that decreases the incentive of individuals to take risks, make
investments or hire employees.

Thank you for taking a moment to read this. I simply could not let your
assertions pass unchallenged.

Thomas Lecoq
Owner, Lecoq Practice Development

David S. Mason said...

And I responded to Mr. Lecoq as follows:
Thanks again for your thoughtful comments. You make many good points, and of course the government is often wasteful and inefficient. But given the current meltdown in the private sector, I would ask "compared to what?" And in some areas, for example Medicare, government run programs are less expensive, less wasteful and more efficient than private ones, both here and abroad. The U.S. has the most expensive health care system in the world, yet in international comparisons, we ranks near the bottom of developed countries in terms of outcomes.
> I entirely agree with you on the problem of government debt. This was one of the central concerns of my CSM piece, and is the reason I argued for NOT cutting taxes. It is a combination of tax cuts and increased federal spending (including for war) that has caused these unprecedented increases in the federal debt. This is a burden both on the economy and on future generations.
> You cite Ireland as a good example, but take a look at Ireland now. The government is near insolvency.
> You are skeptical of the ability of the government to solve problems. And I share your concerns about the ability of government to dig out of the present mess. But I do not see the market solving the problem either, at least without huge dislocations and suffering. And I think there are things that government can and should do, including providing education and public safety, building infrastructure, and helping those who fall through the cracks of a free enterprise economy.

David S. Mason said...

And Mr. Lecoq's rejoinder:
It is interesting that you cite the efficiency of government-run health
care. As a consultant to doctors who work under such programs, I know
that their efficiency has come at high cost to doctors and patients.
The current approach to care is to deal with with the presenting
complaint, and unless something obvious is observed, to not address the
underlying cause.

This hit home personally yesterday with the news of a friend's mother
who was robust going in for an efficient surgery two weeks ago. Doctors
removed a precancerous pancreatic growth. In the interest of efficiency
the surgeon decided a drainage tube was not required. The doctor saved
several minutes and a few dollars in disposable tubing. The outcome was
several days of intense suffering followed by her death--all
attributable to the surgeon's efficient decision. This is not an
isolated incident these days. My father in law died after receiving
another post surgery patient's meds. Electronic medical records did not

A very old friend is on the verge of death following knee surgery. He
was perfectly healthy going in, even played tennis. Two years have
passed and this doctor has turned into an old and feeble man. An
optometrist of considerable note, this friend is no fan of MDs or HMOs.

I do believe that medical decisions regarding older patients includes an
unexpressed standard: He's old, only a few years left, not economically
sound to have him survive. Efficient medical care seems always to
produce this point of view. Consider that it is policy in many
countries to delay or deny treatment to older patients and the outcome
is often early death.

Due to low reimbursements and high surgery costs, many hospitals deny
slow or meticulous surgeons the use of operating rooms. Look at the
staff of large scale HMOs and you'll discover they are dominated by
foreign educated doctors. The radiation and chemotherapy oncologists
who treated me were all Chinese. Many of the other physicians I've met
were educated in England, but citizens of third world and emerging
countries. My care was adequate only because I insisted and
demonstrated knowledge of the medications, interventions and radiation
effects. They were not able to be efficient, they were required to be
good. Most HMO patients are not so assertive, or they are too old or
feeble to press for better care.

I admit to being sensitive on the issue of government medical care and
the resulting efficient care delivery. Few political issues have more
personal impact that this one.

Most certainly letting the market resolve the economic crisis will be
painful all around--higher taxes, lost jobs, foreclosures, cashing out
shrunken retirement accounts will be painful, particularly for the
imprudent who followed the herd and bought high. But I think history is
fairly clear that it is the market that must correct itself and that
government deficit spending is a palliative with a large bill that comes
due later.

While it is popular to lay blame for the current crisis entirely on the
executive, the Congress is not innocent. Part of their duty is to hold
regulators to account regarding policy, for example the relaxation of
mortgage lending rules, permitting low-quality mortgages to be
securitized and requiring that balance sheets report only the current
(depressed) value of securities. Although I am a Republican, it is
clear that once attaining power, my party acted as the worst GOP
caricature by placing corporate interests above all others. They
deserve to be tossed out.

I feel great ambivalence about the war. It is an expensive quagmire
that has given Muslim radicals tools to attack our reputation and pursue
their goals. And I'm not certain those thousands of lives lost were
justifiable. I think Mr. Obama's promise to pursue the fight in
Afghanistan should be considered in light of the historic failure of all
invaders to win a war there.

I disagree with many democrat ideas and think they will do considerably
more economic harm. However, I join the majority of people who wish
President Obama only the very best. It is my hope that tight money will
moderate the democrats actions and motivate them to seek more practical

What a pleasure to have this exchange. You make thought provoking
points and raise questions worth considering. Hope my replies have
occurred for you as worthwhile.

Thomas Lecoq
Apple Valley, CA