The Price of Liberty: Paying for America's Wars

by Robert D. Hormats

Book Overview

In a bracing work of history, a leading international finance expert reveals how our national security depends on our financial securityMore than two centuries ago, America's first secretary of the treasury, Alexander Hamilton, identified the Revolutionary War debt as a threat to the nation's creditworthiness and its very existence. In response, he established financial principles for securing the country--principles that endure to this day. In this...

• Format: Hardcover
• Language: English
• ISBN: 0805082530
• ISBN13: 9780805082531
• Release Date: May 2007
• Publisher: Times Books
• Length: 344 Pages
• Weight: 1.40 lbs.
• Dimensions: 1.2" x 6.4" x 9.3"

Customer Reviews

A highly recommended addition to American History shelves, and a sharp warning against the obstacles

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.

4% of GDP

Foreign Investment: foreign loans provided the nation with critically needed money. Hamilton argued, the lack of national tax condemned the nation to a permanent weakness and the government to debilitating dependence on the state for revenues. State Power ruled supreme when central government was bound. The new constitution gave Congress exclusive authority to authorize federal borrowing and to lay and collect duties, excises, and imports. Congress determined that the treasury could spend. The nations commander and chief was over the military but depended on Congress to authorize funding of war debt. Duties: Import duties were consider a tax on the rich where direct taxes were assessed on the value of the individual's assets. The average American lived on a farm or in a small village and bough few imports. Direct Taxes: Direct taxes were seen as more coercive than import duties. Property owners were compelled to pay the direct tax. Direct taxes were used in times of emergency and limited by Congress to impose. The direct tax was appropriated among the several states and the national population corresponds to the tax portion. The direct tax could not disproportionately gang up on the slave states to pay more taxes. Initially customs and duties provided the bulk of government revenues. Property tax appeared during war times and existed in the 19th and 20th century, as a result of continual war. The revenue bill passed as a tax on importation necessary for support of government, the discharge of debts, and the means to encourage production and commerce. Duties on coffee were 5 to 15% and luxury items 15% tax. The tonnage act placed modest duties on registered tonnage of American owned ships. Coalitions: The war in Iraq was seen largely as a unilateral American effort. No Islamic nations were involved. Building strong coalitions helped establish international legitimacy and encourage participating nations to pay a large portion of their costs. War required massive borrowing. In the early part of the war, the American people were assured costs would be low. Politicians cast aside worries about post war reconstruction believing that Iraqi oil production would reach 2.3 million barrels per day and defer much of the reconstruction expense. It didn't happen. GDP: Politician managed to sidestep tax increases, hard recession, and increased nonmilitary spending (social security, Medicaid, and Medicare). The war was only costing 4% of GDP, whereas, the Korean war cost 10% of the GDP and Vietnam cost 15% GDP. The war was marketed as a "long war on terror" with financial similarities to the cold war. Prior to 9/11 pentagon spending was slowly decreasing. GDP pressure to spend on non-military expenditures is predicted to increase. Social security, Medicare, and Medicaid are face with entitlement blitz from some 79 million, post WWII baby boomers. The demand for entitlement is sure to crowd out discretionary spending. Dem

It is not too late to do what is right for our country

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.

Brilliant, cogent book

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.