Book Review: Bankruptcy 1995: The Coming Collapse of America and How to Stop It by Harry E. Figgie, Jr., with Gerald J. Swanson

A Denunciation of America's National Debt

Something for nothing. A free lunch. Government as Santa Claus. How alluring! Hence nowadays a widespread defiance of the law of opportunity cost – the idea that every choice, public or private, involves a denial of the highest valued alternative benefit. In the public sector the denial may be political, but isn’t such defiance at the heart of modern government’s penchant for central planning and deficit finance and its appalling record of mismanagement and wasted resources of what Ludwig von Mises called “planned chaos”?

Author Harry E. Figgie, Jr., the head of the Cleveland-based $1.3 billion conglomerate Figgie International Inc., seems to agree with the thesis that government interventionism and central planning spell trouble, that it is at best a zero-sum game and more likely a negative-sum game, that government has nothing to give save what it first takes away, that lunch is anything and anywhere but free. His book arrives as a new administration takes hold in Washington.

"The security of our country depends on the fiscal integrity of our government, and we're throwing it away."Bankruptcy 1995, with dozens of tables and graphs, with a foreword by former Senator Warren B. Rudman of New Hampshire and written with the assistance of University of Arizona economist Gerald Swanson, constitutes a call to arms, a denunciation of America’s growing $4 trillion national debt, and a forecast that interest on the national debt, now exceeding $200 billion annually, is likely to soon become the biggest item in the federal budget, topping the outlays for the Pentagon or Social Security. Declares Senator Rudman, stunned at the planned chaos: “We are at war economically. Our nation’s wealth is being drained drop by drop, because our government continues to mount record deficits and, in order to finance its obligations, puts us at the mercy of foreign lenders. The security of our country depends on the fiscal integrity of our government, and we’re throwing it away. We’re doing nothing to protect it; instead, it’s politics as usual.”

For his part, Mr. Figgie decries the politics of interventionism, of free lunchism, and tells how America got into this mess. The telling adds up to a valuable lesson on why government is the problem and not the solution, on why government planning is an oxymoron. He notes how, for example, the Balanced Budget and Emergency Deficit Control Act of 1985, otherwise known as the Gramm-Rudman-Hollings Act, a carefully planned program of reining in budgetary excesses year by year, amounted to no more than a “waltz” to “public posturing.” The revealing timetable of federal deficit reduction and actual deficits follows:

      Year       Target Deficits       Actual Deficits

      1987       $144 billion         $150 billion

      1988       108 billion          155 billion

      1989       72 billion            154 billion

      1990       36 billion            221 billion

      1991       0                         269 billion

Mr. Figgie further decries what he calls “debtspeak” or “budget chicanery,” a kind of Washingtonese or Orwellian language in which “yes” means “no” and a budget “reduction” turns out to be a budget increase. In late 1990, for example, Congress reported that its famous Capitol Hill-White House compromise budget, the one in which President Bush broke his “no-new-taxes-read-my-lips” pledge, would produce savings of 2.4 percent in 1991 and 4.8 percent in 1992. Savings? No way. Actual outlays climbed by 11.1 percent in 1991 and 16.2 percent in 1992. No wonder public opinion rates Congress in lower esteem than any other major group in society.

How do we extricate ourselves from this trap? Declare war on fiscal irresponsibility and privatize, privatize, privatize.Still, how do we extricate ourselves from this trap? Counsels the author: Don’t raise taxes — that would only blunt economic growth and encourage the spenders. And don’t monetize debt — that would only mean more money chasing fewer goods, accelerating the inflationary cycle of boom and bust.

Instead, says Mr. Figgie, do cut spending, especially entitlements, and privatize, privatize, privatize. In sum, do declare war on fiscal irresponsibility and create a new private-public task force to wage it along the lines of the earlier Grace and Hoover Commissions.

The Figgie counsel makes sense, but look at it from the viewpoint of politics: Would it reverse decades of successful shenanigans at budget manipulation that have driven down the U.S. dollar in real terms from 100 cents in 1941 to 10 cents in 1997? And doesn’t it take two to tango — the politician and the citizen — the voter mesmerized by “free” government goodies, anxious to get his cut of the loot?

So the biggest value of the valuable Figgie book, it seems to me, may be its long-term role in helping to educate the citizen and his representatives in Washington and in other halls of government that political corruption is a function of interventionism, that privatization is the way to go, that nothing is for nothing, that political planning is for the birds, that the only way to get more and better lunches is to earn them. 

Dr. Peterson is an adjunct scholar at the Heritage Foundation and a contributing editor of The Freeman.

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