by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Historians and pundits routinely overlook the fundamental importance of monetary policy and taxation in the rise and fall of great powers. They churn out countless books on strategy, growing or declining economic strength, weapons systems, diplomatic machinations and the like. But rarely do they examine the critical role of money and taxes in the fate of nations. Proposed appointments to the Federal Reserve and the Treasury Department, for instance, never prompt the media to elicit comments from national security experts.
Keep this basic truth about money and taxes in mind as the White House focuses on the necessity of rebuilding our rundown military and countering the aggressive, anti-American thrusts of Russia, China and Iran.
If the U.S. is to constructively play a keep-the-world-stable role, it must have a sound dollar and a sensible, low-tax-rate system. These beget the innovation and economic muscle necessary for such responsibilities. They generate the benign conditions for expanding prosperity around the world. Our robust success would spawn policy imitations everywhere. …
… Whenever we have strayed from the true path of power and prosperity, we and the world have paid the price, most dramatically with the Great Depression and the terrible inflation that took place during the 1970s and the early 1980s. In both periods U.S. power and prestige sank, and the world suffered. We almost lost civilization in the 1930s and early 1940s. Hard as it is to believe, in the 1970s the soon-to-die Soviet Union was seen to be the ascendant power.
We strayed again on the money front in the early 2000s, when we deliberately let the dollar weaken. We shouldn’t underestimate the damage the 2008–09 economic crisis did to the reputation of free markets in China and in Russia and among “thinkers” and pontificators everywhere.