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America Is Not Broke Paperback – June 1, 2015
The Amazon Book Review
Author interviews, book reviews, editors picks, and more. Read it now
Midwest Book Review: Small Press Bookwatch - Critique: Exceptionally well researched, written, organized, and iconoclastic, "America Is Not Broke" by Scott Baker (Managing Editor/Economics Editor and writer for Op Ed News" is impressively informed and informative. Very highly recommended for community and academic library Economics reference collections and supplemental studies reading lists, "America Is Not Broke" is ideal for the non-specialist general reader with an interest in the true workings of the American economy.
About the Author
I am a research-hound so writing is the perfect career choice for me. America is Not Broke! is the result of 6 years of learning, writing, teaching and interviewing in the Alternative Economics field, which is a very different place from what appears on mainstream media. The 4 trillion dollar plus solutions in my book would turn around the American economy to the positive, in a sustainable, fair and American-values way...forever! Neitherworld is my first published book. Years of research into Archaeology, Native Ojibwe culture past and present, government spy agencies, and Astronomy preceded writing the book. It's a pretty entertaining read too! (see the reviews).
I am also a Managing Editor/Economics Editor and writer for Op Ed News - a top 100 blog.
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An even worse flaw is the author jumps right into detailed arguments about minutiae rather than explaining the main points. For example, the book opens with an argument for eliminating or ignoring limits on the Federal government's ability to issue currency without debt. The entire discussion consists of extensive quotations about technical matters of law and historical practice. Surely the important point is whether replacing debt with unrestricted currency issuance is a good idea or not. If it is, then we can consider what steps, if any, need to be taken to make it legal (and those should be in a book written by someone who knows something about law, aimed at lawyers and other specialists). If it isn't a good idea, then we don't need to worry about how to make it legal.
The author claims his book details five major ideas. One of the five (repatriating offshore corporate profits) is neglected entirely. The discussions of the other four all cover minor side issues only, and are all done in an inconclusive debate format in which the author quotes extensively from hair-splitting arguments made by other people, claims he doesn't agree but never quite explains why, and then moves on to the next topic.
For example the section on monetizing government assets is entirely concerned with an argument about the total value of government assets, and none of the people he quotes seem to know much about that. As with the issue of divorcing currency from debt, the important point here is whether it is a good idea to replace taxes with either selling or generating additional income from government assets. If it is a good idea, then it's worth asking how much money we can hope to raise this way. If it's not a good idea, then the capacity doesn't matter. Moreover if we do want to know the capacity, it would make sense to start with official accounts and explain what adjustments should be made; and that book should be written by an economist specializing in this matter, to be read by other economists.
At least the parts of the book mentioned above relate to the stated topics. About half the book does not even do that. For example, there is a section on the ten worst CEOs, and another section on the legality of Detroit's bankruptcy filing. The author does not appear to know much about these topics, the sections could be cut-and-pasted from ranting blogs. But the bigger problem is they don't have anything to do with how to fund government. They seem to be included as generic populist red meat to stir up emotion and distract from the missing logic relating to the main points.
The biggest problem is an incorrect framing of the problem. Contrary to the author's repeated claim, no one says America is broke. The Federal Reserve accounts show a net worth of $130 trillion, and that number excludes some important items. What people do say is that the government has promised more money than it can reasonably be expected to raise through taxation or borrowing. The "fiscal gap," the present value of government promises (including pensions, social security, medicare, loan guarantees and so forth) and estimated expenditure minus projected tax revenue, could be $210 trillion (there is wide disagreement about that value as it depends on a lot of hard-to-forecast items).
To put that on a per capita basis so the numbers are easier to comprehend, America is like a guy with $400,000 in the bank, who has plans to spend $650,000 more than he earns over his lifetime, including money set aside for his retirement, money promised to his kids for college, money promised to support his aged parents and so forth. No one would say this guy is broke, but he does need to make some choices today, or he will be broke at some point in the future. He can try to earn more, spend less, renege on promises or expropriate assets currently owned by others.
The author's appealing solution is to spend more and increase promises like social security; earning more painlessly due to increased economic productivity from the increased spending; and to cover the shortfall by expropriating all the land, natural resources and natural monopolies in the economy (including Facebook, for example).
This dramatic solution raises obvious questions. Could it work? Is it fair? Is it wise? How could it be implemented? None of these questions are answered in this book, but the reader has to wade through a lot of dense pages to figure that out.
The perspective is that of a vigorous and broad economic activist, who has worked hard to promote all of the economic fronts he presents. Besides establishment opposition, Scott has run into most schools of thought in each area of economic reform, some of which are at odds with each other. Scott has either worked with and/or butted heads against each school, and his strong personal and intellectual encounters are naturally interesting and enlightening. As a result, Scott has produced a book that takes one on a tour of economic reform movements, full of diverse perspectives and studded with telling references to online resources that you won’t find in any other place, let alone spun into a single text.
Review by Jeff Graubart
Baker’s book is both refreshing and enlightening in a world hooked on the toxic medicine of austerity. In the first part, he examines the effect of Congress using its legal authority to produce debt-free cash, as it did during the Civil War, to pay for infrastructure improvements. Such cash distributions would not be inflationary, because the increase in productivity would exceed the cash spent. In fact he cites several studies that show how even Social Security payments, which are not direct payments for productive labor, still increase productivity by 1.8 to 2.0 times. This is due to demand-driven economic expansion, what I like to call bubble-up economics.
Baker describes our current fractional reserve banking system, where money is not created by Congress, but rather anytime a bank makes a loan. Few people realize that except for coins, our entire monetary system is controlled by the banks, not government.
In the second section, Baker talks about Georgism, and the land value tax. This is the tax Milton Friedman called “the least bad tax” since it does not interfere with productivity, and land won’t go away if it is taxed. He quotes Mason Gaffney, a leading Georgist, who has calculated that, the $5.6 trillion currently collected in taxes at all levels could be raised from a land value tax. That is $1.6 trillion higher than my own calculations, but included is the interesting taxation of such monopoly resources as time-slots at airline gates. Baker goes on to say, “Whatever the exact number of trillions, this untaxed rent could be taxed and returned to the public whose demand created it in the first place without damaging the economy, and in fact spurring it on.” That is the crux of Georgism, that land value is created by the community and should be returned to the community, and Baker gives a nice introduction to the ideas.
Another interesting “land” tax is one on monopolies in virtual space, huge internet sites like Facebook or Google. I would agree that sites should be taxed in proportion to the bandwidth used. Facebook value is created by the social networking community, just as physical world land value is created by the community. However, Baker’s argument that virtual land is time-constrained, that the site should pay a tax for the time I spend on the site, as opposed to just the bandwidth I utilize, strikes me as unfair and non-Georgist.
Baker succinctly expresses a concept that I have been trying to put into simple words for some time on the exploitation of natural resources, particularly in third world countries. “Whenever labor needed to develop land is the least, the human suffering will be the most.” This harkens to the Georgist concept of wealth creation being a product of labor acting on land. Baker further enlightens by expressing a correlation between the degree of wealth and the degree of labor.
Due to the power of the Chinese Communist Party in shaping the Chinese economy, along with their newfound fondness for free markets, some Georgists, me included, have hoped China would follow the path of Sun Yat-Sen and be the proving ground for a land value tax. Baker includes compelling letters from associates sent to the Chinese leadership. These are more than ordinary letters, in as much as they were accompanied by high-level meetings with Chinese officials.
Baker’s discussion of “The new neo-slavery” is a compelling account of the violence caused by Reaganomics and all that followed. Requiring “volunteered” servitude for $2.50/hour to receive public assistance is nothing short of codified slavery, and a great hardship to the public service organizations that must accommodate these “volunteers”. Massive denial of public assistance and massive fraud are the two logical outcomes. Baker calls for a minimum living wage or a Basic Income Guarantee, but to me those two are in different leagues. Raising the minimum wage will end up increasing land rents, while a BIG, paid for from land rents and/or the debt-free cash Baker eloquently describes, will truly end poverty.
Baker ends the book with some technical essays on how much assets cities and states have on their books, even when they claim to be broke. Actuarial data is manipulated to increase required return and assets are considered untouchable in determining return. Thus low interest rates like we have now make all returns inadequate even though there are billions on the books.
The book is a good introduction to monetary theory and Georgism. I strongly recommend it.