Whose Century Is This Anyway? | HughHewitt.com | 12.13.10

The news out of Washington this week has focused on the tax bill before Congress.  Both House and Senate liberal Democrats continue to display their economic illiteracy, playing the class warfare card even after the current and prior presidents of their own party have, at least for a time, given up that ghost.  The real issue maintaining the current tax rates is profound.  It is, whose century is this anyway?

In 1941, in a Life magazine editorial, Henry Luce coined the term “the American Century.”  He wrote:  “Throughout the 17th century and the 18th century and the 19th century, this continent teemed with manifold projects and magnificent purposes. Above them all and weaving them all together into the most exciting flag of all the world and of all history was the triumphal purpose of freedom.  It is in this spirit that all of us are called, each to his own measure of capacity, and each in the widest horizon of his vision, to create the first great American Century.”

When Luce wrote, many believed the century ahead would be a German century under Nazism or a Russian century under Soviet rule.  But now, sixty years later, no one doubts that Luce was right and that humanity is blessed that things turned out that way.

By the end of the twentieth century more of humanity than ever before lived under governments that required consent of the governed, where rule of law administered through impartial courts was the norm, and where spontaneous human enterprise was given room to bloom through market economies.  One of many payoffs was that, as the World Bank reported in April, despite setbacks from the global economic downturn “the developing world as a whole is on track to halve extreme income poverty from its 1990 level of 42 percent by 2015.” ( http://tiny.cc/yliy6 )

But what about the century ahead?

Today American dedication to the support of the standards of a free society appears to be lagging. Everyone knows how we took a pass on the popular protests in Iran, how we sided with the advocates of arbitrary left-wing government in Honduras, how senior-level American interest in human rights and democratic reform appears to have waned everywhere.  As the Wall Street Journal editorial page argued this morning  (http://tiny.cc/9vcdl), we are in a “democracy recession” in which “political freedom is in retreat in much of the world.”

Last week the New York Times reported that among the Wikileaks documents were State Department memos to Ukrainian and Kenyan officials protesting military aid those countries were giving to the resistance in southern Sudan.  A senior Kenyan official was quoted as saying that his government was “very confused” by the American position.  The Bush administration had encouraged the Ukrainian-Kenyan actions building up the anti-genocidal forces in Sudan.  Now the supposedly liberal Obama administration appeared to be siding with the butchers.  As Donald Payne (D, NJ), outgoing head of the House Foreign Relations subcommittee on Africa told the Times, “I don’t think the Obama administration has a clear policy on Sudan.” (http://tiny.cc/4803f )

But more than the clarity of purpose and self-confidence of our diplomacy will determine America’s sway in the century ahead.  Our role as an effective global force for human dignity in the 20th century came both from our example and from our economic vitality.  This vitality flowed directly from having the world’s most entrepreneurially friendly economic policies.  Here we return to taxes.

The core issue in the tax debate is not rich versus poor.  It is growth versus stagnation.  And in the absence of growth, it is whether economically liberalizing but politically rigid China or some constellations of retrograde powers will develop sufficient vitality to neutralize our positive place in the world.

Entrepreneurship and global trade have driven our economic growth over the past forty years. They have been the essential forces behind our technological and productivity revolutions.  They are the principal reason why an inflation-adjusted middle class income the year Eisenhower took office would not clear the poverty line today.

But the availability of entrepreneurial finance is highly sensitive to the tax rates, particularly the capital gains tax rate (http://tiny.cc/7f8of ).   Indeed, all investment and growth has repeatedly proven sensitive to tax rates.  A quarter century of American growth began the day that the Reagan tax cut legislation of 1981 took effect on January 1, 1983.

For several years now, the looming tax increases that will kick in on January 1st have acted as a drag on our recovery from the Fannie-Freddie panic.  Will we recover our vitality and with it reinvigorate our global role?  Those are the essential stakes in the tax debate.