Customer Reviews

The Price of Liberty: Paying for America's Wars from the Revolution to the War on Terror

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Bob Hormats, a well known and highly regarded leader and thinker in the business and geo economic worlds, has written a hard hitting and important new book. In the long run, our nations power and security are the result of our economic vitality. Without a robust economy, we could not create the amazing military we have. Hormats goes back to the inception of our nation and looks through the telescope of how our national leaders, both executive and congressional, have dealt with the surge in expenditures that result from war. Though never easy, and fraught with controversy, in all wars except the Vietnam and the 'war on terror' of today, our leaders have either cut domestic outlays or raised taxes or both, to ensure that future generations will not be bogged down with the debt of the previous generation. We saw the results of LBJ's guns and butter, his inability to openly confront the costs of social programs and a war. We paid for that mistake for two decades. As we sit here today, President Bush's domestic spending increases for the last six years, and the high cost of the war, along with tax cuts, have created large debts our generation will pass on to our children. Hormats does an amazing job at using just the right level of detail, with stories and color, to keep the topic engaging; but, the serious of the idea can not be overlooked. Our national leaders have always behaved responsibly in times of war to protect the economic future of our nation, and we risk our national security in the future, if we don't do so now. This should be required reading for all patriotic and concerned Americans. It is not too late to do the right thing and hand future generations the fiscally sound nation they deserve. Hormats should be thanked for his efforts.

Bob Hormats is an author of great perceptiveness and intellectual depth. For more than four decades, he has been engaged with the issue of globalization -- long before the term "globalization" became en vogue. As vice chairman of Goldman Sachs International, Hormats has had access to the corridors of high finance all around the world. As a member of several administrations in Washington, he's had access to the corridors of power in many chancelleries. Hormats writes with clarity and depth, and invites the reader to understand the pressing contemporary issues of our time. For those who especially want to understand how the American political and economic systems mesh in the policymaking zone, this book is absolutely essential reading.

...followed by one chapter of evasiveness and some relatively unsurprising conclusions. The Price of Liberty is being marketed as an analysis of our current quagmire in conducting our national defense against terrorism. Good marketing, no doubt, but for this reader the chief value of the book is historiographical. Beginning with Alexander Hamilton and his brilliant schemes to pay for the Revolution after the fact, Hormats has written what amounts to a history of the American economy in terms of tax policies and the debates about taxes. Because that history is a kind of 'punctuated equilibrium', Hormats vaults from war to war, not unlike an old-fashioned high school textbook: the Revolution, the War of 1812, the Civil War, WW1, WW2, the Cold War, Vietnam, with passing references to the other events of warfare in the two centuries of American coping. But the principal actors in Hormats's military history are not generals; rather they are secretaries of the treasury, leading congressmen, and presidents often overshadowed by their own administrations. This amounts to a fresh and thought-provoking history of the United States as a whole over the 'long duration'.

Hormats begins by expounding his vision of Hamilton's Vision. It's quickly obvious that Hormats himself is Hamiltonian to the core. Hamilton was the prime advocate of strongly managerial federal powers - Big Government - employing taxation and fiscal mechanisms like his national bank to stimulate the growth of the economy, especially the manufacturing sector. Part of Hamilton's vision, Hormats, says, was to build the financial stability to support a secure national defense. The contrary vision of Thomas Jefferson - an agrarian, states' rights centered isolationism - didn't play out very successfully during Jefferson's own administration or during that of his Virginian successors, but it has never faded away. During every subsequent crisis of the federal budget in wartime, more or less the same fault lines of difference have ruptured Congress; military preparedness versus social spending, borrowing versus pay-as-you-go, sales/excise taxes versus income/property taxes, and with increasing acrimony, progressive taxation of the wealthy versus regressive taxation of the masses. Even such seemingly current notions as 'supply side economics' have had previous incarnations in Congressional debate, as Hormats amply demonstrates.

Hormats also documents the uneven success of presidents at controlling the fiscal policies of their administrations, including those whose own parties controlled Congress. The most interesting chapter in the book - chapter 5, A Righteous Might - focuses on FDR's frustrations with the coalition of Republicans and conservative Democrats who actually wrote most of the tax laws of the New Deal era. Conservatives and libertarians of the present era would do well to re-examine Roosevelt's record in light of Hormats's revelations, rather than demonizing FDR for decisions which weren't entirely his to make.

The weakest chapter in The Price of Liberty deals with the administration of Ronald Reagan. Hormats carefully exposes the naive irresponsibilty of Reagan and his economic advisors - their refusal to adjust their Reaganomic theories to the realities around them - yet he is oddly evasive about the results. Like most Reaganites, he exaggerates both the novelty and the impact of Reagan's Cold War tactics, even though he has already acknowledged the continuity of such tactics from Truman to Carter. He pays quick lip-service to Gorbachev's declaration that the USSR collapsed chiefly from internal failures, yet he credits the pressures of budgetary competition with toppling Communism. That's an odd paradox. If the Soviet Communist economic system was so dysfunctional in comparison to Capitalism, why did it take 60 years to falter? On the other hand, if it was dysfunctional, why should Reagan get credit for tipping it over? [My own opinion, lest I be accused of leftist sympathies, matches Gorbachev's - that the USSR was dysfunctional economically and socially, and suffered a well-deserved collapse of its own making.]

Hormats is distinctly positive, though less 'historical' in his approach, about the Gulf War policies of George H.W. Bush. Then, after no more than one clause of one sentence about the Clinton administration, Hormats delivers an indictment of the fiscal incapacities and blunders of the George W Bush debacle that could be read aloud as a campaign speech by any candidate of any other party.

I won't summarize Hormats's concluding recommendation for a sounder fiscal policy to prepare the US for the future. The value of this book, in my mind, is not Hormats's plan to pay for the War on Terrorism but rather his insightful historical recounting of the payments of the past. Definitely a five-star history, but I've deducted one star for slipping from history to journalistic opinion-making in its final chapters.

Former member of the board of directors of the Council on Foreign Relations and international finance expert Robert D. Hormats applies his expertise and extensive historical research to The Price of Liberty: Paying for America's Wars, a thoughtful history of how America has paid for its conflagrations from the Revolutionary War debt (deemed a threat to the nation's creditworthiness and very existence by America's first secretary of the Treasury, Alexander Hamilton) to the invention of the greenback during the Civil War, the adoption of a progressive and populist income tax during World War II, the arms race budgeting that allowed the United States to outlast the Soviet Union during the cold war, and the diplomatic cost-sharing of the first Gulf War. A critical look at America's precarious modern-day financial position - including the heavy toll of over-dependence on oil, and a debt that relentlessly climbs especially due to unchecked social security spending and rising interest payments - closes The Price of Liberty, along with a lament that Hamilton's wisdom has been all but forgotten today. A highly recommended addition to American History shelves, and a sharp warning against the obstacles facing America's future.

I just saw this author give a lecture with Richard Brookhiser at the New-York Historical Society, and although it was brief, the author gave an extremely cogent overview of how the U.S. paid, and is paying, for its wars. The book is engrossing and very highly recommended.

Wars are extremely expensive and destructive; it's a pity the monies spent on defense cannot be allocated elsewhere (but, I am a firm believer that defense spending is more a stimulus to the economy than simple transfer payments.) However, in the near future, pressure from other budgetary obligations will necessitate a drastic reduction in defense spending, or an extreme cut back in social spending.
I feel sorry for the baby boomers and their quickly disappearing dream of retirement.

This well written and well researched book would be very worthwhile reading for anyone interested in economics and fiscal policy.

It details American political and financial attitudes toward, and debates over, financing US wars and how the demands of war financing influenced the development of modern Western fiscal and tax policy.

As just one example of the many fascinating historical facts covered in this book, the modern system of direct tax deductions from payroll by employers was first introduced in the 1860s by Abraham Lincoln to finance the US Civil War and was resurrected by Franklin Roosevelt to finance WW2.

In short, a fascinating, well written and well researched book.

An excellent history of US war financing history (& policy) that spares no blows regarding current US war financing policies. A quick read, particularly for anyone interested in history, politics, or public policy.

I would normally deduct one star for three flaws, but because they are easily corrected and the author's former boss is now Secretary of the Treasury, and perhaps powerful enough to ignore Dick Cheney's craven amoral direction as documented in both The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O'Neill and Vice: Dick Cheney and the Hijacking of the American Presidency, I restore the one star for actionable potential. My review of the latter itemizes 23 high crimes and misdemeanors committed by Dick Cheney as documented by the authors, and no review our fiscal decrepitude can be complete without understanding how Dick Cheney has bankrupted the Republic and betrayed the Nation and our troops.

I like this author. He gets it. I would gladly work with him in remediation as he suggests, which I summarize below. First, however, the three flaws:

1) He really believes the government baloney about how the military budget is a tiny fraction of our disposable income in comparison to Social Security, Medicare, and Medicaid. Not so. See my first image. If we restore universal service (inclusive of demanding two years from anyone asking for citizenship), end most of the "support" (read: looting) contracts that transfer taxpayer wealth to Halliburton and others of their ilk, and if we reform our national health system to provide a mix of lifestyle, environmental, alternative or natural, and medical care, with drug prices based on global wholesale prices, we drop drug unit prices from $600 (US) to $6 (global), bypassing the current Canadian pricing ($60). Extend the retirement age, modify education to be lifelong, and dramatically improve minimum wages, end illegal immigration, and introduce children to the work force as apprentices earlier, and we have the flexibility to heal ourselves and get out of insolvency, which the Comptroller General told Congress is where we are as of six months ago.

2) The author understands that asymmetric warfare allows our enemies to spend $1 and we have to spend much more. Bin Laden actually said this publicly a few years ago, and my second image illustrates both "the Bin Laden equation" of $1 from them requires $500,000 from us, and also the ten threats and twelve policies that must be addressed in a harmonized inter-agency and coalition fashion, using transparent accountable information as the "glue" for information arbitrage, a term I devised in the 1990's, the conversion of information into intelligence and intelligence into profit or cost and risk reduction. The hedge fund managers have been doing this for decades, with one big difference: they manage for the profit of the few rather than the sustainable profit to the many.

3) Alluded to above, and certainly in strong support of the author's recommended program, is the role that information and public (legal, ethical, sharable) intelligence can play in creating infinite wealth. See for instance, the books below (or read my reviews as a short-cut):

Revolutionary Wealth
The Wealth of Networks: How Social Production Transforms Markets and Freedom
The Wealth of Knowledge: Intellectual Capital and the Twenty-first Century Organization
Powershift: Knowledge, Wealth, and Power at the Edge of the 21st Century
Infinite Wealth: A New World of Collaboration and Abundance in the Knowledge Era

I take the trouble to emphasize the above prior to summarizing the author's views, and loading a third image on how I am attempting to work with Amazon and others to create a global information arbitrage economy that includes serious games and empowers every *locality*, because "The Price of Liberty" is NOT financial, it is intellectual. Where we have gone wrong these past decades is in forgetting that if We the People drop out of politics, we are left with corrupt minority parties that are Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It and a Congress that is impeachable for failing to act on two stolen elections and as the Article 1 branch of government (see for instance:

Breach of Trust: How Washington Turns Outsiders Into Insiders
The Broken Branch: How Congress Is Failing America and How to Get It Back on Track (Institutions of American Democracy)

It is in this larger context that the author's views become vital to the Republic, and actionable by the current and next Secretary of the Treasury. For the record, I am betting on Bradley-Bloomberg and 16 years of transpartisan government with multi-party (5-6 parties, not two) announced in advance and elected as part of "Our Deal."

This is a lovely history with deep meaning for our future. The author's core point is that a long war requires a long-term fiscal strategy. His elaborations make it clear that the Bush-Cheney Administration, which made fiscal policy from the Office of the Vice President and continues to demean the Cabinet, has bankrupted the Nation.

The author is especially strong at showing the differences between past indebtedness and today's indebtedness. Today we have no surplus, we have an energy deficit, we have idiotic tax cuts for the wealth and an unfair burden on the poor, we continue benefits that are unaffordable and crippling to our evolution, and we are not planning for the future needs of our rapidly aging and often needy.

I was moved to conceptualize "Our Deal" after reading the author's brilliant but down to earth discussion of how the Roosevelt "New Deal" and the Truman "Fair Deal" and the Johnson "Great Society" all ran aground, more or less, because of the rocks of war. The author is clear is saying that it was the Reagan era that turned us into a debtor nation.

The author connects social justice at home with the sacrifices of our troops abroad, and concludes that the Pentagon, above all, must re-examine its allocation of resources (see my fourth image, the "Four Forces After Next" that I began recommending in 1992).

Amnesia & Ambivalence are the death of a Nation. Lack of inter-agency coordination is killing us. We need energy patriotism, savings patriotism, and I would add, democratic patriotism. I am working to create a "big bat" for Transpartisanship, one capable of raising $500M a year in Liberty Bonds with which to buy back our government and force Congress to attend to the people's priorities.

This book helps us all.

The bulk of "The Price of Liberty" summarizes how America paid the costs of its former wars, ensuring its future stability. This provides the backdrop for today - increased spending on non-war items, combined with increased defense spending in a long-term struggle and a major tax cut. Obviously, this is a major break with the past and "does not compute."