Posts tagged with: debt

I just read the introduction to Amity Shlaes’s forthcoming biography, Coolidge: Debt, Perseverance and the American Ideal. She has been very gracious in taking an interest in the work I have been doing on Coolidge and my recent Acton commentary on the 30th president.

Shlaes was interviewed in the Fall 2007 issue of Religion & Liberty about her book The Forgotten Man. I quickly realized in my own research there is no biography that captures Coolidge’s deep relevancy for today given the mammoth federal debt and the centralization of federal power. Coolidge took limiting federal power and its reach seriously.

Without naming names or titles, many of the Coolidge biographies in print are simply sub par. That will change with the release of her biography and this is a book that needs to be out now. There is no release date set in stone to my knowledge or I would offer it up to readers of the PowerBlog.

In the introduction, it is clear just how well Shlaes understands Coolidge’s leadership on economic issues and his emphasis on thrift. I love that she played off her title The Forgotten Man by calling Coolidge “The Forgotten President.” I’ve certainly noticed in my own talks when I go out and discuss Coolidge that so little is known about him.

In her introduction, Shlaes brilliantly draws out comparisons of Coolidge with George Washington, John Adams, Abraham Lincoln, Grover Cleveland, Theodore Roosevelt, Woodrow Wilson, Warren G. Harding, John F. kennedy, Lyndon Johnson, and Ronald Reagan. Some of her insightful comparisons I would never have highlighted on my own. Shlaes is a gifted writer and I foresee this book being very influential with the ability to transform contemporary thinking about our national government.

One of the things that draws me to Coolidge is his appreciation for the past. He was a very modern president who oversaw great technological advances and an America that was modernizing at a rapid pace but he always reminded the people of who they were and the great heritage that gave birth to the American ideal. “If we are to maintain the great heritage which has been bequeathed to us, we must be like-minded as the fathers who created it,” declared Coolidge.

One of my favorite books is The Word of Life by Thomas C. Oden. In the introduction to that book Oden quotes Henry Vaughan’s “Retreat:”

O How I long to travel back,
and tread against that ancient track! . . .
Some men a forward motion love,
But I by backward steps would move.

If Coolidge had heard those words, which is quite possible, I feel he would have loved them.

Virgil's Aeneas fleeing the sack of Troy with his father on his shoulders and leading his son by the hand.

“Even the conventional everyday morality,” writes Vladimir Solovyov,

demands that a man should hand down to his children not only the goods he has acquired, but also the capacity to work for the further maintenance of their lives. The supreme and unconditional morality also requires that the present generation should leave a two-fold legacy to the next,—in the first place, all the positive acquisitions of the past, all the savings of history; and, secondly, the capacity and the readiness to use this capital for the common good, for a nearer approach to the supreme goal. This is the essential purpose of true education….

According to Solovyov, there is a basic, commonsense morality by which most parents feel an obligation to leave an inheritance to their children and give them the opportunity and know-how to use it. He goes on to argue that this principle ought to be expanded generationally: “the present generation should leave a two-fold legacy to the next,” passing on what it has received and instilling in the next generation the ability and desire to use the heritage of human history for the common good. This, he believes, is the “essential purpose of true education.” As commencement ceremonies are celebrated throughout the country this month, how well, I wonder, do we match up to this standard in the United States today? (more…)

Why do democracies struggle with debt? One reason, as John Coleman notes, is that one of the problems is that debt is essentially an intergenerational wealth transfer:

Blog author: flair
Friday, March 23, 2012

Would dissolving the European common currency, as proposed by the French free-market economist and entrepreneur Charles Gave in his book Libéral mais non coupable (“Liberal But Not Guilty”) free the Old Continent to stand upright on its financial feet again? Or would dissolving the currency drastically end the European project altogether, as some pro-Euro technocrats in Brussels fear?

Charles Gave, the chairman of the investment firm GaveKal, (and whose lecture I listened to at a 2011 Acton Conference Family Enterprise, Market Economies, and Poverty in Rome), offers an excellent economic policy analysis in answering these urgent questions.  However, as you will read below, the European side of the financial crisis cannot be fixed in purely economic terms.

In his chapter “Europe: A Turtle on its Back”, Gave says that the EU’s already slow-moving economic tortoise is now in a worse position while laying flat on its back – its shell “heavily weighed down by a systemic debt trap” whose origins are found in keeping the common currency afloat at all costs.

Gave believes that the only way to get the turtle walking upright again would be lighten its load by effectively dissolving the heavily debt-tied euro and restoring national currencies to pre-1999 monetary standards. In Gave’s opinion, a restoration of national currencies across the Eurozone would force member states to return to a culture of self-reliance, that is to say, to count more on their own national fiscal and monetary means and standards.

The positive effect would also mean abandoning the quasi-idolatrous ways in which Europeans go to save their common currency while closing a blind eye to less responsible member states’ reckless spending.

Gave’s criticism of local/national responsibilities and the very origins of debt raise deeper questions about the cause of the  European debt and monetary crises, but it is far from offering a  more complete picture of the problem.

Acton’s research director, Dr. Samuel Gregg, helps us fill in the gaps.  As he said in a recent editorial for the American Spectator:

Europe does indeed face huge monetary challenges. Having a common currency while permitting euro-members to violate mutually-agreed debt limits was always a recipe for disaster. Greece could happily splurge on adding tens of thousands of public sector workers to the government’s payroll and financing Chicago-esque patronage politics, while Portugal built dozens of now-idle, often half-finished soccer stadiums.  Why? Because everyone knew if things went bad, then preserving the euro (a ‘sacred cow’ for Europe’s political class) from the impact of nations’ defaulting meant that heavyweights like Germany would go to considerable lengths to try and prevent a currency-meltdown.

Yet this amounts to only a partial — and therefore inadequate — explanation of Europe’s present disarray…[It] can’t disguise the truth that there’s something even more fundamental driving Europe’s economic crisis.

From the beginning, post-war Social Democracy’s goal … was to use the state to realize as much economic security and equality as possible, without resorting to the outright collectivization pursued by the comrades in the East.  In policy-terms, that meant extensive regulation, legal privileges for trade unions, “free” healthcare, subsidies and special breaks for politically-connected businesses, ever-growing social security programs, and legions of national and EU public sector workers to “manage” the regulatory-welfare state…with little-to-no experience of the private sector.

None of this was cost-free. It was financed by punishing taxation and, particularly in recent years, public and private debt. In terms of outcomes, it has produced some of the developed world’s worst long-term unemployment rates, steadily-declining productivity, and risk-averse private sectors.

In sum, the idolatrous preservation of a European common currency and the ensuing “debt trap”  and “domino default” which Gave articulates in his book  is more fully understood when we link the European financial crisis to a crisis of Christianity — a  faith which makes challenging demands on practicing members’  moral interrelationships, levels of risk aversion, and practical ways in which they care for fellow citizens and see their moral duties relation to their neighbor and society.

Christianity, as defined so well by the Catholic Church’s teachings on subsidiarity, demands that social problems must be first solved at the individual, local level. Only if the local and personal proves insufficient should the problem to be taken to higher levels, with the state as the means of last resort.

Subsidiarity – a guiding principle to all responsible Christians – helps limit public debt by relegating moral duties first and foremost to the private sphere.  Subsidiarity is a check against  forms of collectivization and the expensive public costs involved. When too much of the moral duty is placed on the state, public costs grow and debt is possible.  When it is not, the state’s welfare machine is tends to shut down.

In conclusion, if it is true that the vast majority of Europeans no longer practice their Christian faith or take their charitable duties very seriously, one can rightly doubt how easily it will be them to free themselves from the weight of unsustainable debt  (see also Sam Gregg’s ALS lecture below on this topic). If non-practicing Europeans tend to pass on more of their individual moral responsibilities to the state  for the welfare of the elderly, sick and need people of society, it ends up being a costly delegation of Christian freedom and responsibility.  In economic consequences, this makes the EU a fertile ground for a systemic debt traps and precarious monetary crises.


A week ago, Dr. Samuel Gregg addressed an audience here at Acton’s Grand Rapids, Michigan office on the topic of “Europe: A Continent in Economic and Cultural Crisis.” If you weren’t able to attend, we’re pleased to present the video of Dr. Gregg’s presentation below.

On Valentine’s Day, just one day before having to tender its application to the International Olympic Committee in Lausanne, Switzerland, Italy’s pragmatic Prime Minister Mario Monti showed no romantic spirit by canceling his nation’s dream to host the 2020 Summer Olympics.

In a last-minute decision made Feb. 14, Prime Minister Monti explained at a press conference that the already overburdened Italian taxpayers simply cannot afford to finance the estimated $12.5 billion to bring the 2020 Olympic Games to Rome.  “I do not think it would be responsible, considering Italy’s current financial condition.”  (See video below.)


The news sent shock waves through the national media and angered Rome’s Mayor Gianni Alemanno, who had aggressively put together the logistical plan and budget.

Yet Monti is no dupe and was honest enough not to hoodwink his nation into taking on financial responsibilities it is in absolutely no position to accept.  Finally, we are seeing an Italian politician demonstrating some degree of practical realism and sense of sacrifice. The Italian Premier, while spearheading historic fiscal reforms, wants the country to wake up and smell its caffe by finally shedding the need to fund unwarranted public expenditures.

While time will tell whether Monti and his government are making wise decisions, the heart-wrenching financial assessment was based on few simple black and white economic facts. Italy has an unbridled a national debt to GDP ratio, which has swelled from 115 percent  in 2010 to 120 percent in 2011 while experiencing stagnant growth and uncontrolled inflation over the last 10-15 years. Next you have the nation’s toxic dependency on massive public welfare programs, despite Monti’s drastic attempts to change Italy’s entrenched entitlement culture.  Then you add in widespread tax evasion, very little new entrepreneurship among young business persons, the Italian bond and spread crises, Standard and Poor’s further stripping of Italy’s credit rating (from A to BBB+) and downgrading 34 of the country’s top credit institutions at the start of 2012 and you got a country that is on the verge of insolvency.

It couldn’t get worse, but a day after Monti renounced any Olympics bid ANSA news service announced Italy had officially entered a recession with negative growth recorded for the last two quarters.

No Olympics, no gold. But whatever wealth seemed guaranteed at the end rainbow, it would be foolish to think the 2020 Games would bolster an entire national economy for more than a very limited period (and quite realistically, only the benefactors of Italy’s crony capitalism and the mafia-infested public works sectors). 

It is high time that Italians themselves start permanently growing their economy through new forms of entrepreneurship — just like it did in its economic boom era when Italy last hosted the Summer Olympics in 1960 —  and not count on riding on the tails of the government’s large-scale, short-lived public projects.

The Keynesians will have little to cheer about in this story. Yesterday I saw this report from CNN Money that said U.S. consumer credit card debt fell by 11 percent in 2011. Mississippians led the Union by reducing their card balance by 23 percent. While total household debt fell by only 1 percent last year, it is still a towering accomplishment when compared to the U.S. federal debt increase.

This is exactly the point Jordan Ballor and I made in our 2008 commentary “The Fiscal Responsibility of Mall Rats and Bureaucrats.” In that piece, we pointed out that the federal government is a significantly poorer steward of our resources when put up against the supposedly “materialistic” and “selfish” consumer.

The inability of the federal government to curtail spending should be considered a form of insanity when one simply looks at the numbers. Instead, as I pointed out before, government spending is now so sacred for some in the religious community, it is a shrine that must be encircled.