To strengthen defence, cut taxes and balance the budget is very difficult.
Ronald Reagan managed the first two tasks, but failed in the third. President Bush made no effort to control nondefence spending in his first term and is only now trying to do so – we shall see how how well he does (he does not have President Reagan’s defence of the Democrats being in control of the House of Representatives)
However, it is not impossible to achieve all three tasks. Perhaps the most important example in history is that of the Emperor Anastasius.
When Anastasius became Emperor of the Eastern Roman Empire in 491 AD (the Senate allowed the choice of Emperor to rest with the Empress Ariadne) the Western Roman Empire had already collapsed. Here and there (such as in the Province of Britian) there were local leaders who continued to fight against the Germanic peoples, but the vast majority of the old empire in the west was under various Germanic kings.
The Eastern Roman Empire (which evolved into what we call the Byzantine Empire) was not in a good state. As with the Western Empire taxes were crushing, and yet the treasury was empty and the defences of the Empire were falling apart.
Anastasius fought many wars, both against invaders and against domestic rebels (mostly Chalcedonian Christians who objected to his austere Monophysite variety of Christianity – although I am not claiming that all Monophysites were austere, and it should also be remembered that Anastasius did not tend to persecute other sorts of Christians – not even Arians, the religion of the most of the barbarian rulers in the West and a religion whose doctrines were further from the “one divine nature of Christ-God” of the Monophysites, than were the “two natures of Jesus” view of the Chalcedonians from which the vast majority of modern Christians get their doctrines), and yet he greatly reduced taxes. Anastasius abolished the “chrysargyon” (a major tax on the urban population) and reduced the “capitatio” – one of the great taxes on the peasantry. It must never be forgotten that most citizens of the Empire were and had always been country people (the concentration of the written records with city matters misleads us). And it was the demands for ever greater taxation that had led the Emperor Diocletian to tie peasants to the soil – i.e. to turn the bulk of the population into what would in later times be called serfs.
Anastasius was working to a plan to abolish the capitatio (although the land tax would remain – and it had to be paid in gold), but sadly the Emperor elected by the Senate after him (Justin) and the real man of power (Justinian) had other plans. Also if provinces were devasted by war Anastasius would grant remission of their taxes. An obvious policy perhaps – but not every Emperor did this, too often a province might be almost destoyed by war, only for the tax collectors to come along afterwards and finish the job.
At the same time Anastasius rebuilt the army, so whilst it did not become as good as the great Roman army of old, it avoided becomming the sick joke that the Western army had turned into. The army with which the Generals of Justinian won so many victories in their efforts to retake the West was at least in part the work of Anastasius.
Such defences as the great fortress city of Dara (built to guard against the Persians) were also the creation of Anastasius. As was the Long Wall of Thrace – part of the complex of defences that protected Constaninople. A city that withstood siege after siege – not falling till the Forth Crusade of the early 13th century, hundreds of years after Anastasius died (of course, after the Frankish occupation the Byzantines made a recovery of sorts – which was not to end till the capture of Constaniople by the Turks in 1453).
Anastasius also reformed the coinage (the actual minister in charge was named John the Paphlagonian – why should such folk be forgotten), so the East remained a money economy (not collapsing into barter) with coins in the denominations useful to the citizens, and Byzantine coins remained a normally undebased system of exchange for many centuries.
And as for “balancing the budget” – Anastasius left a reserve of 320,000 pounds (weight) of gold in the treasury when he died in 518.
Well “how did he do it”?
There was no magic, just the hard slog of careful cuts in wasteful spending (such as shows to amuse the urban mob – although even Anastasius dare not touch the chariot racing, whatever the of truth or otherwise of the claim that he had the support of the Green faction from the chariot races). And the endless work against corruption (the ways that officials found to get money in their pockets rather than in supplying the army).
The efforts of Anastasius and his ministers (such as Polycarp and Marinus) to reform administrative structures, cut spending and root out corruption have a history among Roman financial managers of the better sort all the way back to Sulla in the days of the Republic (Sulla abolished the Corn Dole, and he smashed the tax farmers [folk who demanded X for the state and X plus for themselves] who had looted the provinces – this made Sulla very popular with folk away from Rome regardless of how many Popularies he killed in the city).
Indeed only half a century before the time of Anastasius the Senate elected Marcian as Emperor – and he abolished a few taxes and charges upon Senators, which he was able to do partly by the bold move of refusing the pay any more protection money to Attila the Hun, and partly by just hard control of spending.
However, in recent centuries only Anastasius had cut taxes for the great mass of people, whilst rebuilding defence, and balancing the budget (indeed building up a directly held reserve that would have made Martin Van Buren proud).
The Republic was centuries dead. Under the Empire “liberty” sometimes seemed to mean a picture of free bread on the coins (part of the destruction of liberty being hailed as liberty itself – a very modern touch), And the ideology of the late Roman Empire was collectivist to the core, yet Anastasius was able to good – indeed vast amounts of good. Individuals do matter in history.
But what is the relevance of me ranting on about ancient history? What an Emperor can do can not be matched by the democatic politics of modern nations. Why even the old Republican Sulla did not get his reforms into practice by constitutional means – he cut down his Popular party (“party” in a loose sense of course) enemies like pork (although the round of political killings in Sulla’s time was actually started by the Popularies – a point that many history text books seem to oddly forget) and his reforms did not last long after his retirement.
This is where the example of Philadephia comes in. In the 1930’s the United States was fully democratic (yes there were some Poll taxes and blacks in the South could not vote – but by ancient standards northern cities like Philadephia had an almost unthinkable proportion of their population with the right to vote – no slaves, few resident aliens, and even voting rights for women).
In the days of the early Republic democrats (whether the political party was Jefferson’s Republicans or later Jackson’s Democrats – and whether the various democrats happened to like each other or not) had been small government men (Jefferson with his abolition of all internal federal taxes, Jackson and Van Buren with the paying off of the national debt…..). But by the 1930’s the people who viewed themselves as “progressive” or “democatic” (whether they were in the Democratic party or not) were deeply collectivist. Also the popular culture was collectivist – in books or films the bad guy was normally a rich man of business (just like today – with a few brave exceptions), and (of course) the 1930s was the period of the Great Depression with up to a quarter of the workforce unemployed and the economy in chaos.
In this period the budget of the city of Philadelphia went from a revenue of 133 million dollars and spending of 163.4 million Dollars in 1930, to a revenue of 127 million Dollars and spending of 127.6 million Dollars in 1940. Indeed in many years of the 1930’s Philadelphia balanced the budget – and all without the special “help” of the new hand outs from President Roosevelt’s federal government.
In short Philadelphia did not expand government – in the teeth of the supposedly inevitable spendthrift nature of democracy, and in spite of the intense collectivism of the 1930’s, the temptation of money from Washington and the longest depression of American history.
For those who may think that there may be special factors involved in the stats I gave above (and prices did fall in the first couple of years of the 1930’s) compare Philadelphia’s stats with those of New York City:
In 1930 New York City government had revenue of 725.6 million Dollars and spending of 681.8 billion Dollars. In 1940 New York had revenue of 896.7 million Dollars and spending of 1327.5 million Dollars.
In short, spending about doubled in New York city in the 1930’s (whereas it fell in Philadelphia) and by 1940 New York city government was spending more than ten times what Philadelphia city government was spending (and no, Philadelphia’s population was not only a tenth of the population of New York).
Yes the Philadelphia that had Conservative black newspapers as late as the 1960s is long gone (indeed perhaps it was really killed by the new City Charter just after World War II), and yes Philadelphia did not provide for its own defence (it was not a classical city – for all its Greek name). But it is one example that shows that even in the most difficult of circumstances polticians do not have to be collectivists – they choose to be. Political leaders can fight the growth of statism if they really wish to do this.
It is not “inevitable social trends”, the “historical period” or any other factor. Polticians are government growers because they choose to be so, they do not have to be so.
For some of the facts above I made use of the work of the late AHM Jones (on Anastasius his short work “The Decline of the Ancient World”, Longman 1966, is still all one needs) and of Bruce Allen Hardy (on Philadelphia). I came upon Dr Hardy’s thesis (Wayne State University 1977) recently and it gave me the stats to support something that I had long known (that Philadelphia resisted the growth of statism in the 1930s).
Of course I am certainly not claiming that either the late AHM Jones or Dr Hardy would support any of my political opinions.
FWIW, Philadelphia went into relative decline after 1930 as New York flourished. Some data here.
Just wanted to thank you for one of the most interesting posts I have read on this or any other blog for a very long time.
New York had overtaken Philadelphia long before the 1930’s – indeed this had happened in the 19th century. This was partly geography (New York was the better port) and partly the “place to be” concept – once New York becomes the largest city in the nation, companies and other institutions tend to want to go there (this is one reason why so many companies and other institutions continue to be in New York).
In the 1930’s New York accepts federal subsides and Philadelphia (mostly) declines them. Hireing government workers with money from D.C. is harldy “flourishing”. The great poverty and unemloyment that existed in New York in (say) 1938 harldy shows a nice picture either.
There is also the hidden susbsidy of the increace in the money supply after the early 1930’s. When someone says “the money supply increaces by X per cent” mainstream economists present a picture of everyone getting X per cent more money – but of course this is not what happens. Money goes out via the Federal Reserve system – it hits certain institutions first and tends to “stick” to them (see F.A. Hayek’s essay on this subject in “New Studies on Philosphy, Politics and Economics” 1978). One of the places where such financial institutions tended to be was Wall Street – credit-money expansion (whether in the late 1920’s or in some periods of the 1930’s or after) is hardly something to boast about.
Of course Philadelphia had its own favoured corporations – but not as many of them.
An interesting point about Philadelphia is that aid to mothers with dependent children greatly increaces in the early 1940’s – what is happening here? Surely the claim is not that there was a sudden increase in poverty in the early 1940’s? No what is happening is a weakening of the resistance to the ideology of collectivism. An ideology that would lead to the growth of a welfare underclass in America.
Sulla:
I had a rush of blood to the head here. Of course I accept that Sulla was a killer (and not just in the city of Rome) and he confiscated the land of his enemies and distributed it to his troops.
I suppose my disgust for rich “Guardian reader” (in the United States New York Times reader) types – wealthy folk who talk endlessly of the “rights of the poor” to other people’s money, led me to this rush of blood. After all Sulla was acting on what the Popularies had always said they wanted – the rich giving property to the poor.
Of course the Popularies most likely did not have it in mind that it be THEIR property that was taken, and it going to Sulla’s poor soldiers. The Popularies (at least by the time of Sulla) tended to prefer the provinces being looted by tax farmers and the money being used to buy votes in Rome with “bread and games”. The ultimate example of this is the record of Julius Caesar – the man who came to lead the Popularies after Sulla’s time.
Caesar killed (according to some historians) millions of people (mostly civilians) – and all to get loot to buy votes in Rome.
But it should be remembered that it was the sainted Marius who first got troops to swear loyality to him as an individual (not to the Republic) and ignored the limitations on reelection to office.
Pericles of Athens played a similar game – buy votes by taxes on (unconnected) rich people at home and on the allies (thus leading to the eventual defeat of Athens). The greatness that was Athens replaced by a load of people who voted in return for pay.
To turn back to the modern day:
I wonder how the Kerry family and their billionare friends would like a nice “redistribution” of property – THEIR PROPERTY of course. Demanding “higher taxes for the rich” when you pay 12% yourself (on a vast income) stinks.
Having now read the stats that D Anghelone has kindly provided, I note that they do NOT show some great decline in Philadelphia as compared to New York City in the 1930’s (although the greater subdidies New York was given would lead one to guess that there might have been one).
People moving out of the more statist post World War II Philadelphia hardly undermines anything I wrote.
I know it is dull when people just repeat what others have said, but
“what Delmore Macnamara said”
Julius
Just my libertarian instinct in answer to D Anghelone:
I suspect that one of the reasons why big cities grow as big as they do are that a relatively large percentage of the population are better off living in the city ONLY because of government subsidies. I don’t know how it is in the states, but I suspect that there’s a rather large transfer of wealth from the counties surrounding New York, while it may be less so in Philadelphia. Again, only going by instinct and TV series, it is my impression that there is a rather large proletariat in New York that lives in rent controlled apartments, are on the dole and/or dealing crack. Is the problem as pronounced in Philadelphia, I wonder?
BTW
Is it just me or does this editing box suck? Can’t copy, can’t paste and whenever I try to make a ‘ , Firefox doesn’t detect that I’m typing and fires up the search box.
Having now read the stats that D Anghelone has kindly provided, I note that they do NOT show some great decline in Philadelphia as compared to New York City in the 1930’s (although the greater subdidies New York was given would lead one to guess that there might have been one).
People moving out of the more statist post World War II Philadelphia hardly undermines anything I wrote.
Relative decline. Philly did lose its no. 1 status (population) in the 1800s but was no. 2 in 1930. It’s now no. 5. In terms of economic status there was and is no comparison.
The tabular data is for the Philadelphia Metropolitan area. The Philly population is but 1.5 million.
My mother (from the sticks of Massachusetts) and father (immigrant from Calabria) made it through the Depression well enough in New York. They didn’t receive any direct government subsidy. Mom worked for Ma Bell which addressed the employment problem by having people work halftime rather than laying off half of them. You didn’t live high on half-salary but you lived.
I’m not attempting to undermine you in any way.
… I suspect that there’s a rather large transfer of wealth from the counties surrounding New York…
Quite the opposite.
I apologize to D Anghelone for implying that he was out to undermine my argument (not that there would be anything wrong in that – if I have made an ass of myself I should be shown up as an ass).
As for the population stats.
I did not know that Philadelphia was no2 in 1930 (my guess was that it might have dropped to no3). But if Chicago overtook Philadelphia in the 1930’s – so be it.
The great Chicago tax strike of the early 1930’s (which led to a big cut in the property tax rate) is an interesting story in itself.
On State government spending in New York compared to State government revenue in New York – well I do not know how the stats pan out. But I do know that one must include not just State subsidies to the City government, but direct State spending in the city.
Federal government spending (compared to taxes) must be done the same way (the spending on the U.N. and the rest of it). And, of course, the hidden subsidy of Federal Reserve credit-money expansion.
This in no way creates “new wealth” overall for the United States (via the “multiplyer effect” or other such mythology), it transfers income and wealth within society (as well as distorting the capital structure).
As for my own family history. Well my father worked in a “sweat shop” in 1930’s London. He actually got to go on a trip to Germany for the fur coat event in (if I remember correctly) Leipzig. Oddly enough (for a Jew in the 1930’s) my father liked Germany – although he guessed that the National Socialists were quite serious in the aim of creating a Jew free “united Europe” and that war was inevitable.
Not because the British would fight to save the Jews – but because Britian would not want to be part of this united Europe (whatever is true now, the British of the 1930’s had a strong belief in their national independence).
My mother did not work in the 1930’s (she was too young), her father James Power (Irish Catholic) was the family bread winner – he was a truck driver for Shell.
There have been quite a lot of attacks on the Governor of New York State lately (I have heard them in Britian so they must be quite loud). With people saying that has given up the effort to restrain government (in his first year as Governor he actually managed to cut spending – the first Governor since Thomas Dewey to manage this).
However, I have some sympathy for him. His veto has been overidden by the legislature (for example on the minimum wage), and he has been hit by court case after court case.
There was the one where a judge just decided that there must be more education spending in New York City – in spite of the fact that there is lots of government education spending there already without any sign of the schools getting up to a decent standard.
And there was the recent case where the Mayor of New York (yet another “liberal” [statist] Republican Mayor – of the sort that New York has had several times since the 1930’s) demanded that the State come and give more money to pay City debts.
Being Governor of New York State must be like smashing one’s head against a brick wall for four years.
Thought provoking.
I apologize to D Anghelone for implying that he was out to undermine my argument…
Well, you guys get enough of that so maybe I should better choose my words.
The I/O of NYC tax flows is never simple. Due to business/corporate taxes, NYC usually “contributes” more to New York State and to the Federal Treasury than it gets back. Though this would be prior to the judge’s education ruling, Mayor Bloomberg has claimed that $11 billion more goes to NYS than comes back to NYC.
Taking NYC as an entity, did more tax money come to the city from the Feds than went the other way during the Depression? I don’t know but the Feds got their money from somewhere.
Another thing that might be worth considering was New York being the home to so many bluebloods and big banks. FDR was himself from that pool. The Feds probably cared more about propping up the banks than catering to the Little Flower or stinkweed Marcantonio. OTOH, those boys did help deliver votes.
Some exceptionally wise rulers can adopt reasonable policies of tax reduction and budget balancing. It’s a matter of personal integrity, a feature scarce among politicians.
What thanks do they get for it from a democratic political system ??
Is there anything in the system that motivates them to behave in an economically responsible way ?
Seems the opposite is the case. Politicos use reckless spending to get votes, and don’t worry about the economical deluge that is going to happen long after their term ended. This is a built in feature of the democratic system.
I am tired of the myth that Reagan “cut Taxes” He did no such thing.
In 1981 Total IRS collections were $601 Bn In 1989 $1,013 Bn an increase of almost 70%.
Reagan restructured the tax code to promote growth and taxes increased.
The deficit was entirely the result of spending growth
So Reagan cut tax rates. And in so doing, boosted the economy, and increased tax revenue!
So he did cut taxes… in a way.
😛
TWG
Jacob, that’s why political parties are somewhat of a good thing. Parties which recognise the problems of high taxation would impose some form of pressure upon their reigning president, in order that the next president wouldn’t inherit a mess.
Of course, not all organizations know about taxation and the economy.
TWG
The Wobbly Guy’s view of the possible role of a political party is the same as that of Edmund Burke. A party as alliance of people to restrict the size and scope of government.
However, Burke was on the way out of the “Rockingham Whigs” long before the French Revolution (the school text book reason for the break). When Rockingham himself died (1782 if my senile memory serves) the new informal party leader (Charles James Fox) was not really interested in restricting government.
For a while they managed to paper over the cracks – for example Burke voting against free trade with Ireland and justifying the vote by the tax provision in the bill (Fox was just against free trade between Ireland and Britian – period). But the difference between Burke (liberty as restricted government) and Fox (liberty as the rule of Parliament) was bound to blow up sooner or later.
In Philadelphia the Republican party was antistatist – but by the end of the 1930’s the writing was on the wall (first government housing in 1937, local income tax 1939 – although it was contested in the courts).
After W.W. II various rich “liberal” Republicans openly declared themselves Democrats.
To be any good (from the Classical Liberal – Libertarian point of view) a political party has to do two things. First win power, and then reduce statism.
President Bush’s Republicans are fine at the first task (they have got the White House, the Senate, the House of Representatives), but show little sign of being good at the second task.
Agreed. There are two important factors to consider:
1. The political party recognizes that restricting the size of government is in its own favor over the long run when it puts future candidates into office.
2. The populace supports the same.
However, both elements are lacking nowadays, and the concept of social justice and equality is very much ingrained in the psyches of people nowadays.
You can’t stay in power to do any downsizing when people will just vote you out the next go-round and the next taking-over party will just increase the size of the government. Perhaps Bush and Co are trying something deeper. They’re trying to stay in power long enough to convince people that a smaller government is good, before they start the actual downsizing.
Of course, that presumes that is what Shrub wants, which may not be true.
You can do things the people do not favour if the results are good. For if the results are good most people will either say they were always in favour – or just not care.
Also following the opinion polls is dangerious. According to the opinion polls people want more spending on virtually every aspect of the welfare state and they want more regulations to deal with every problem “there should be a law against it”.
But if you follow the such a policies then your name is George Herbert Walker Bush (more spending on every welfare state program, higher taxes, less defence spending, Americans with Disabilities Act and endless other regulations), you help create a mess – and you do not get reelected. President George Walker Bush has a lot of faults, but (thankfully) “he is not the President his father was”.
Firstly you do get reelected because you have helped create a mess – but also, if people really want statism they are going to vote Democrat.
What is the point of voting for a Republican who you suspect does not really believe in all this stuff – but is only doing it to please the voters?
Taxes (sorry “tax rates”) are down, and gun control has been weakened (the law did not get renewed, for all Mr Bush’s statements about how he loved the Clinton law). Now for the difficult bit – government spending.