Upon his return to Rome after his victory at Pharsalus in 48 B.C., Julius Caesar found the country not only in political and social and moral disorder, but also in fiscal disorder. According to Michael Grant, writing in his book, The Twelve Caesars, one of the greatest problems of the age was the existence of numberless private debtors, victims of ancient laws that permitted money lenders to exploit debtors.
The problem was compounded by the hoarding of coins and by depreciation of land and property values. The debtors were not able to raise money by the sale of estates in order to discharge the principal of their debt, nor could they find means to pay interest which had become a great and permanent burden.
There was popular pressure for complete cancellation of all debt. Caesar proposed a compromise: Commissioners were appointed to appraise the value of debtors' property as it stood prior to deflation. They were given the power to require creditors to accept those properties in payment of debts at their pre-war, pre-inflation value. The sum total of interest payments that had been made on a debt were deducted from the principal. Thus, if figured in U.S. money, a person who had paid $80,000 in interest on a debt of $100,000 would have a remaining obligation of only $20,000.
The program gave relief to debtors and reassured the creditors that not all debt would be canceled. Caesar was assassinated two years later, in 44 B.C., but his policies had straightened out Roman fiscal affairs, and had worked so well that in times of crisis subsequent emperors canceled private debts as well as debts to the government. In 117 A.D. the Emperor Hadrian canceled private debts to the imperial treasury, and some of the debts owed to provincial governments. And Marcus Aurelius, on coming into power in 161 A.D., took similar actions.
In the United States, today, every person carries a $16,000 share of the national debt, which is in excess of $4 trillion. If one eliminates children and those adults who make little or no contribution to meeting the costs of government, the remaining approximately 100 million taxed persons carry a debt obligation, in addition to their debts to non-government institutions or persons, a burden of $42,000 per person as their share of the national debt. On the average, approximately $2,000 of the tax payments of each of these 100 million persons goes to pay the interest on the national debt.
The major part of these interest payments are passed through to the institutions and persons who hold about $3.5 trillion dollars to the national debt. The size of the debt, therefore, does not disturb financial institutions, as the debt provides an agency for forced savings, and for the collection of interest for them. The effect of government fiscal policy in the 1980s was not to put the burden of the debt on the next generation only, but on the one following it. The national debt which in 1980 was estimated at 7 percent, is now estimated to be 20 percent.
Each time the interest rates rise by 1 percent the deficit rises by about 45 billion dollars. Projections of the effect of what President Clinton calls the "Debt-Reduction Package" are that if it is adopted, the annual federal deficit, now running at about 300 billion dollars a year will be reduced by 50 percent by 1997. In the meantime nothing would be done to reduce the federal debt which would continue to rise during the five years, reaching, depending on interest rates and other economic, fiscal and political factors, to over five trillion dollars by 1997. The debt would then be presentable, in terms comparable to those used on plutonium, in a half-life measure, possibly of 500 years.
Obviously deficit and debt reductions are not within range of conventional and traditional taxation. The debt obligations of taxpayers to the federal government cannot be forgiven, or canceled, as directly as they were by the Romans. They can be reduced, even eliminated for the general taxpayers, by a capital levy, or tax on accumulated wealth, comparable to the estate taxes now levied at the time of death.
According to recent reports and estimates by the Brookings Institution and other sources, approximately 10 percent of the American people have about 70 percent of the privately held and controlled wealth of the country, and one-tenth of the 10 percent have 48 percent of that wealth. During the Reagan-Bush administrations, sustained by Democratic party-controlled Congresses, the wealth of the top 1 percent increased by 33 percent. The top one-half of 1 percent of the population, approximately 470,000 households, have an average wealth of 14 million dollars in liquid assets, not including home equities, per household. Estimates are that the top 5 percent of wealth holders in the country controls assets of more than 14 trillion dollars, and that the top 10 percent control or own approximately 18 trillion dollars worth of the national wealth, again excluding home equities.
During these same years of Reagan-Bush, the lower 80 percent of the population suffered a 35 percent drop in net worth, according to reports, and excluding home equities hold 6 percent of the privately held wealth of the country, having average assets (excluding home equity) of $1,400, per family.
The growing concentration of wealth has been sustained by government policies. It is not a consequence of the work of those who now hold the wealth. Forbes magazine's listings of the wealthiest persons in the United States regularly lists inheritance as the principal source of the wealth of the richest.
Growing concentration of wealth can also be attributed to tax law, tax avoidance, market manipulation inflation, grants of television and radio licenses, general economic growth, and other factors and forces, to which the current holders of great wealth made little or no contribution.
So if it is unfair to pass the national debt onto the next generation, why not tax the past generations that built up the debt and profited by it?
A capital levy, phased in and related to capital gains taxes, should be imposed so as to collect $5 trillion dollars to apply on the debt. It could incorporate a holding period before imposing the tax, providing for some graduation of taxes within the range of differences among the top 10 percent of wealth owners. This would not be a redistribution of wealth, but rather a redistribution of debt.
If a tax in that amount were collected, the top 10 percent of the people in the country would still control some one-half of the nation's wealth. Persons like Paul Mellon, who in a recent statement said that he did not know how much he was worth, or what his current income was, might be taxed to the point at which they would know both of these facts. The average taxpayer would be relieved of his $42,000 share of the national debt, and his annual average tax burden of $2,000, which otherwise would be paid in interest on that debt.
Eugene J. McCarthy was U.S. Senator from Minnesota from 1958 to 1970 and he ran an independent campaign for president in 1976. Since retiring from the Senate, he has taught university courses in politics, literature and history. His most recent book, A Colony of the World: The United States Today, was published in 1992 by Hippocrene Books.
THE PROGRESSIVE POPULIST