A top economic adviser to George W. Bush and Mitt Romney is warning that if America doesn’t adopt a balanced budget amendment to the Constitution it risks a decline and fall in the pattern of the ancient Roman Empire.
Glenn Hubbard is the dean of Columbia Business School, was chairman of President Bush’s Council of Economic Advisers from 2001 to 2003 and was a senior economic adviser to the Romney presidential campaign. His new book, written with Hudson Institute economist Tim Kane, is "Balance: The Economics of Great Powers From Ancient Rome to Modern America."
For readers used to economists fighting endlessly about the Great Depression, the New Deal, the stagflation of the 1970s and the Reagan tax cuts of the 1980s, the work by Mr. Hubbard and Mr. Kane will be refreshing for its long view.
There’s a five-page section in the book on “The Severan Debasement,” named for the Roman Emperor Septimius Severus, who ruled from 193 to 211. Between 193 and 196, by the book’s account, Severus debased the coin known as the denarius to 54 percent pure silver from 81.5 percent. In other words, he paid the empire’s expenses by imposing the tax of inflation.
The British historian Edward Gibbon said Severus was “justly considered” as “the principal author of the decline of the Roman Empire.”
What’s this got to do with 21st Century America? Mr. Hubbard and Mr. Kane draw the conclusion that, as they put it, “the existential threat is internal…The decline in Rome was economic, from the rampant inflation and excessive taxation of the Third Century to the central-planning tragedy of Diocletian.”
Their argument proceeds engagingly through a series of brief case studies in decline — not just Rome but also China, Spain, the Ottoman Empire, Japan, Europe, Great Britain, and California.
They make some illuminating points along the way. One figure, titled “Quality of reporting on China’s economy,” criticizes news organizations for dwelling on China’s growth rates but not its overall Gross Domestic Product or its GDP per capita. In Mr. Hubbard and Mr. Kane’s view, it is institutions — property rights, the limited liability corporation — that determine growth.
Economists with contrary views are sometimes mocked; the authors note that the 1989 edition of Nobel laureate Paul Samuelson’s economics textbook included the line, “The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.”
The conclusion of the book is devoted to a consideration of contemporary American policy. One deficit-closing idea that the authors reject is means-testing Social Security; Mr. Hubbard and Mr. Kane write that “citizens would have the incentive to spend all of their savings before retirement, or worse, hide it overseas bank accounts or cash.”
The ideas for growth that they embrace include tax reform, “alliance agreements” with the United Kingdom, Japan, and Canada to create a freer flow of labor and capital, and reductions in regulatory burdens such as occupational licensing.
The action they recommend most emphatically, however, is a constitutional amendment requiring a balanced federal budget. They write that such an amendment is closer to passage than many people realize; since 1975, 32 state legislatures have petitioned Congress on the issue. Getting just two more to join in, they say, would pass the two-thirds threshold to trigger a constitutional convention.
The appendix of the book is a proposed text for such an amendment; it begins, “Total outlays for a year shall not exceed the median annual revenue collected in the seven prior years.”
The latest estimate of the Congressional Budget Office puts the federal budget deficit for the current fiscal year at $642 billion, down from more than $1 trillion in the past four years.
Doubtless there will be some that say that makes this book ill-timed and demonstrates that the deficit problem is getting solved even without a constitutional amendment. On the other hand, a narrowing deficit puts a balanced budget closer to the realm of the plausible, making the idea of an amendment less likely to be dismissed as an unrealistic fantasy.
Short of constraining politicians with such an amendment, what hope is there? President Bush recalls in his memoir that in the midst of the financial crisis, he told a few close aides: “If we’re really looking at another Great Depression, you can be damn sure I'm going to be Roosevelt, not Hoover.” Sometimes, in other words, the force of historical precedent can be almost as powerful a motivator as the letter of the Constitution.
If Hubbard and Kane’s account of Septimius Severus and the Severan Debasement were as well known as the standard histories inaccurately blaming Hoover’s supposed inaction for the Great Depression, we might not even need a constitutional amendment.
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