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Glen Meakem


America Will Survive

by Glen Meakem
 

Since President Obama took office, we have seen a $787 billion expansion of government and termination of the successful bipartisan welfare reform of the mid 1990s.

Our new president is proposing hard-left policies like "cap and trade" carbon regulations that will impose more than $600 billion in new taxes and socialized health care that will limit freedom and cost at least $1.5 trillion.

President Obama is also proposing a $410 billion "adder" that will take this year's federal budget deficit to $1.75 trillion and a massive new $3.6 trillion 2010 budget that will create an additional $1.2 trillion deficit.

To begin paying for this, the president says he will increase taxes by $1.3 trillion, raising top federal tax rates on American businesses and individuals from 35 percent to 39.6 percent and raising capital gains and dividend tax rates from 15 percent to 20 percent.

Reaction has been swift. U.S. equity markets have crashed by about 30 percent since Obama was elected and 15 percent since his inauguration. Investors are voting "no" on Obama's economic policies and Americans are more scared than they have been since Jimmy Carter was president.

Friends and radio listeners are telling me they fear that the United States may not survive. Some are making comparisons to the fall of Rome.

The bad news is the Democrats in control are pursuing policies that will shrink our economy and reduce our standard of living. The good news is our nation is much more resilient than many people understand.

Why? Let's compare the Roman Empire in the years before it fell to the U.S. today.

There are three key reasons why the Roman Empire fell.

• First, the most powerful aristocrats in the late Roman Empire freely avoided taxation. The lower nobility, regular citizens and merchants – the business classes of the day – were forced to bear the entire load, with people lower down the socioeconomic ladder moving increasingly into serfdom.

• Second, Roman citizens stopped serving in their own military. Security within the empire was light and the borders were garrisoned mostly by foreigners. For all of its achievements, by the fifth century A.D., the Roman Empire was weak.

• Third, in the Roman Empire's later era, Roman law increasingly broke down with disputes and power succession decided by violence.

Compare late Rome to the U.S. today.

Looking beyond the tax transgressions of noted Democratic Party leaders like Treasury Secretary Timothy Geithner, former Sen. Tom Daschle, Rep. Charlie Rangel and others, the United States is a country where people pay their taxes.

In fact, according to the U.S. Census Bureau, the top 1 percent of earners (a group that is constantly changing as new people build businesses and make fortunes) paid 39 percent of all income taxes in 2005. Conversely, the 33 percent of Americans with the lowest incomes paid zero percent of all income taxes.

During a time of prosperity since the early 1980s, the poorest 20 percent of Americans have also increased their real incomes (including all government benefits) on a per capita basis by 44 percent. That is correct: The incessant claims that "the rich don't pay their taxes" and "the poor are getting poorer" are false.

As for our military, it is nothing like Rome's. Our military is an all-volunteer force staffed by young people from across our socioeconomic spectrum. Our military people are better educated than the general population (virtually all have graduated from high school or better) and, according to Defense Department data, they hail disproportionately from higher-income neighborhoods within the U.S.

In 2007, for example, 25 percent of enlisted recruits came from the wealthiest 20 percent of neighborhoods while only 11 percent volunteered from the poorest 20 percent. In addition, over 50 percent of officer recruits came from the wealthiest 20 percent of neighborhoods. The fact is that Americans – even at the highest socioeconomic levels – send their sons and daughters to defend our country.

Finally, in January America completed its 24th peaceful change of power between presidents of opposing parties. More than anything else, the U.S. is a country of laws and the vast majority of Americans obey those laws. When people break the law (even the rich and powerful like Jeff Skilling of Enron, Bernie Ebbers of WorldCom or some recent governors of Illinois), they usually pay the appropriate price.

We have many checks and balances built into our system of government and there is strong, diverse support for this system. The United States under our 220-year-old Constitution is the world's oldest political regime.

Can our system be bent in the wrong direction? Yes. But does it have a history of course-correcting itself? Yes, absolutely!

So regardless of our current economic and political challenges, the U.S. is a lot stronger than Rome ever was. Despite today's poor economic leadership, we will survive and make changes that will return our country to success and prosperity.

Glen Meakem was the founder and CEO of FreeMarkets Inc. in Pittsburgh. He's now a managing director of Meakem Becker Venture Capital.


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