Government

Washington is broken, and the problem is short-term thinking.

In our current system, there is little or no incentive for our leaders to do what is right for the next generation — if it in any way conflicts with immediate concerns.

We know debt is bad, but in the short-term it’s easier to keep spending. And we realize that deficits are a problem, but it’s easier to ignore this problem and keep raising the debt ceiling.

This problem is systemic. For example, our business world is too often dominated by “Quarterly Capitalism,” which means that most companies manage their business one quarter at a time. The cause of this is the way our tax system is structured, with the government forcing this quarterly approach on business.

Likewise, nearly all politicians are required to adopt what Al Gore called “Quarterly Democracy.” Specifically, everyone raising money for political campaigns must report quarterly on how much they’ve raised, and this drives future fundraising and influences media support and opposition of each candidate.

As a result of these quarterly laws enforced by Washington, our business and political leaders are legally required to focus on the short term.

This is a serious problem. It impacts our national finances in a very damaging way. Anytime anyone — from either party or no party — suggests real solutions to current financial challenges, from budgets and debts to deficits and entitlements and debt ceilings and credit ratings, it is quickly ignored or rejected because real solutions can’t be implemented in 90 days or less.

This is a fundamental structural weakness of our current system of governance. Even when party or government leaders agree with a proposed solution, they can’t fit it in to the 3-month cycle and therefore it is always put on the back burner while they focus on immediate issues.

The framers incentivized the masses to think in annual election cycles, the House in two-year cycles, the Executive in four-year cycles, and the Senate in six-year cycles. These concentric cycles encouraged short-, intermediate-, and long-term thinking all at once.

Today, in contrast, pretty much all of our elected officials and business leaders tend to think in 90-day cycles, and the people have been sucked in to this pattern.

In fact, the masses of citizens, who are mostly now required by law to follow the monthly, bi-monthly, or even weekly pattern of paying taxes and bills with every paycheck (instead of annually when all revenues and expenditures are totaled for their businesses or farms), are widely caught in a paycheck-to-paycheck cycle. Indeed, they think monthly, while their leaders think quarterly.

The one group that was supposed to provide truly long-term thinking, the Supreme Court, has frequently done so on social issues but for the last few decades has failed to do so in financial matters. There are few indications that this will change any time soon.

This all benefits the wealthy elite, who do apply a long-term approach and thereby easily rule the rest of society that is caught in a “rat race” of short-term activity and confusion. Faulkner appropriately called it a “sound and fury.”

Hardly any American leaders today are focused on the next thirty years, taking effective actions that will create lasting national progress. In contrast, many leaders in China and India speak in terms of 50, 100 and even 200 years.

Canadian business leader Claude Hamilton called attention to last summer’s meeting between the presidents of the U.S. and China. In their opening remarks, the Chinese president noted China’s great progress over the past two centuries, and outlined Chinese goals for the decades and century ahead. Then President Obama responded by outlining the major contributions of his Administration during the past four years.

The contrast is glaring. We don’t really think about the future, at least not in terms of taking real action. If we did look ahead in any serious way, we’d see the absolute necessity of fixing our fiscal, monetary, entitlement, debt and budgetary problems. We are quickly headed for national financial disaster, but we can’t see it because it looks years off instead of weeks.

In short, our system is broken, and nothing will fix it until we once again learn to take a long-term approach. I don’t know how this can happen. The traditional way, which has worked at many times in human history, is to study history and learn its lessons.

But our current thinking is so myopically short term that when most modern people read history it doesn’t even seem relevant — like watching a movie that is interesting but doesn’t have much to do with us in real life.

I don’t know what the solution is to all this, because any real fix will include a long-term change. And today’s leaders and people mostly don’t understand how to do long-term fixes.

Suggest anything that will take five, ten, or twenty years, and many people today simply give you a blank stare. Then they click on the news and focus on stories that will be forgotten in 48 hours.

Through all of human experience, there have been two effective solutions to this problem:

1. One is for the people to start reading history and classics and thinking in the long-term.
2. The second is for the society to go through a major crash, war, depression or pandemic that forces people to slow down, reassess, and see the big picture.

I hope we still have time to choose the first option.

Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.

Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

The year 2013 is over, and it may go down in history as another drastically negative year like 1913. The hundred year itch? Maybe.

The year started out with high political drama as Republicans and Democrats argued late into the nights on January 1 and 2 in search of a fiscal cliff agreement.

In May and June we watched a domino series of major scandals, including the IRS targeting of conservative groups and the revelation that the NSA is consistently spying on all American citizens.

The drama didn’t let up over the summer, culminating in the widely watched government shutdown in October.

Then came the rollout of Obamacare, and the fact that no, you can’t “keep your doctor, or your insurance company,” no matter what the President promised.

Many Americans lost all faith in politicians — all of them.

But the worst news came in December, with the little-publicized announcement of the two major things that will most likely stand out about 2013:

1. First, China landed a probe on the moon, symbolizing a new level of Chinese expansion into world leadership.
2. Second, the news came out that during 2013 state governments in the United States passed over 40,000 new laws.

That’s not a typo. It’s 40,000 new laws — which means five times that many regulations when all the agencies of government write these laws into agency policies. It’s even more if you add the new federal laws.

Taken together, these signal a serious period of decline for America. We are a nation being overtaken by our biggest competitor (some would say future enemy) China, and simultaneously mired in skyrocketing levels of regulation.

Governments, federal and state, now seem determined to regulate and overregulate every facet of our lives — private and business. Many entrepreneurs, who were already reeling from reams of Obamacare regulations, are now facing more government red tape from every flank.

The free enterprise economy is literally under siege. Those who think this is exaggerated should try to open a significant new business in the United States. Most of the biggest entrepreneurs and corporations who have attempted this recently have decided to build in China or some other economy instead. The U.S. government has become generally hostile to business.

This is a strange reality for the land of the free and the home of the brave. Long considered the bastion of world freedom and economic opportunity, America is consistently less appealing to many businesses and investors.

The December 31, 2013 issue of USA Today summarized this overarching trend by saying that “aristocracy” is now “in” in America.

Aristocracy, really? That’s a bold statement. Yet it is increasingly true. The lower classes are more dependent on government, and the middle classes only survive by using debt. Only the upper class, the elites, are financially flourishing — and many of them rely on international investment that is growing in foreign economies.

Anyone relying on the U.S. economy right now is concerned. What will the escalating rollout of Obamacare bring? How many more government regulations will come in 2014, and how will this further weaken the economy?

The experts are finally taking notice of sharply rising levels of regulation, even if Washington isn’t.

For example, Francis Fukuyama called our time “The Great Unravelling” (The American Interest, Jan/Feb 2014) and Steven M. Teles called it “Kludgeocracy in America” (National Affairs, Fall 2013). We have become a Kludgeocracy indeed, with more business-killing regulation every week.

In The Discovery of Freedom, Rose Wilder Lane said that,

“Men in Government who imagine that they are controlling a planned economy must prevent economic progress—as, in the past, they have always done.”

What is her definition of a planned economy? Answer: modern France, Britain, and the United States. She quoted Henry Thomas Buckle, who wrote:

“In every quarter, and at every moment, the hand of government was felt. Duties on importation, and on exportation; bounties to raise up a losing trade, and taxes to pull down a remunerative one; this branch of industry forbidden, and that branch of industry encouraged; one article of commerce must not be grown because it was grown in the colonies, another article might be grown and bought, but not sold again, while a third article might be bought and sold, but not leave the country.

“Then, too, we find laws to regulate wages; laws to regulate prices; laws to regulate the interest of money…The ports swarmed with [government officials], whose sole business was to inspect nearly every process of domestic industry, to peer into every package, and tax every article…”

This was written about France, just before it lost its place as the world’s most powerful nation, and it was published as a warning to Britain, just before it lost it’s superpower status. This quote applies perfectly to America today.

Great nations in decline need innovation and entrepreneurialism, but instead they choose anti-innovation and anti-entrepreneurial regulation. It’s amazing how every nation repeats this well-known but addictive path of self-destruction.

As Lane Kenworthy argues in Foreign Affairs, opponents of bigger government “are fighting a losing battle.” In the near future, he says,

“More Americans will work in jobs with low pay, will lose a job more than once during their careers, and will reach retirement age with little savings.”

But this will be offset, he suggests, by more vacation days, less working hours each week, and more government programs that pay for many of these people’s needs.

Many of the experts agree — he U.S. economy isn’t going to boom anytime soon, but this will be balanced for investors by significant economic successes in Mexico, South Korea, Poland, Turkey, Indonesia, the Philippines, and Thailand, among other places.

All of this adds up to an America on the verge of what Paul Kennedy called the “fall of great powers”: overreach in international affairs that spends much of the nation’s prosperity, and simultaneously too much government regulation at home — shutting down a nation’s innovative/entrepreneurial class at the same time that the government taxes and spends more and more.

This same pattern brought down the top leader status of Spain, France, Britain and the Soviet Union. Before these, it brought down Athens, Rome, and the Ottoman Empire. Unless the United States changes course, it is following this same blueprint for decline.

When historians look back on 2013, they may well see it as the tipping point to a rapid American downturn. Partisan conflicts, government spying on its own people, drastic government spending, constantly increasing regulation, the rapid rise of China — any of these could fuel real decline. Together they may be insurmountable.

But one thing stands out: In a nation desperately in need of innovation and entrepreneurial initiative, the government is handing out innovation-blocking regulations at a breakneck pace.

The good news in all this is that entrepreneurs don’t give up easily. Tenacity is part of their DNA. The future will be determined by this race between politicians (increasing regulations) and entrepreneurs (innovation and prosperity).

Whoever wins will lead the 21st Century.

Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.

Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

The problems in Washington D.C. aren’t going to be fixed, because Washington is the problem.

One fundamental way Washington operates is incompatible with freedom, prosperity, and common sense. Specifically, Washington today is caught in the rut of post bellum auxilium, and there is little chance of this changing any time soon.

This phrase was used in ancient times to describe politicians and generals who would hear warnings of danger and refuse to provide troops — then, upon hearing that their posts had been attacked and overrun by the enemy, would angrily and publicly gather troops and send them. The troops would arrive at empty battlefields, too late to do anything — which should have been obvious, since the politicians didn’t even send them until the battles were over.

Our government is profoundly dedicated to this method. Consider the many warnings of impending terrorism that came before 9/11, and the drastic Bush Administration response after. Or the fact that only a very few, isolated people saw the Great Recession of 2008 coming, but afterwards the Bush and Obama Administrations took draconian pains to ensure that nothing like this would ever happen again.

Then, when the Arab Spring started with a massive uprising in Egypt, President Obama blamed the intelligence community for failing to predict this event. There are dozens of similar examples, in just the last decade.

Here is the problem. Washington believes the experts. But, as Nassim Nicholas Taleb teaches in his excellent book, Antifragile, the experts are terrible at predicting surprises.

Obviously, that’s what makes such events surprising. And they keep coming, despite the experts’ best attempts to predict and forecast.

Taleb wrote that intelligence analysts and economists fail to forecast most major world changes because these events “are unpredictable, and their probabilities are not scientifically measurable.”

He points out a real weakness with most modern government leadership:

1. governments focus on prediction, then when they are surprised they
2. blame the experts for not forecasting effectively, and
3. rally to create regulations and policies designed to anticipate and prevent events that have already happened.

What they don’t do is create what Taleb calls real resilience, or the ability to withstand surprises — whatever comes.

There are several consequences of this mistaken approach. First, the numbers of regulations skyrocket because politicians think it is their job to anticipate every possible surprise.

Second, the size of governments, debts, and deficits increase as officials try to be prepared for anything.

Third, after each failure, the government becomes more and more dependent on the “experts.”

Common sense dictates that we stop listening to those who consistently get most of their forecasts wrong, but the worry that government must foresee and block every surprise trumps common sense — and more money is spent on more experts whose predictions continue to fall short.

In our book, LeaderShift, Orrin Woodward and I called this widespread problem “Credentialism.”

Taleb wrote:

“Governments are wasting billions of dollars on attempting to predict events that are produced by interdependent systems and are therefore not statistically understandable at the individual level…This was not just money wasted but the construction of a false confidence based on an erroneous focus.”

Surprises will still come, including natural disasters and man-made crises. Nothing government does can stop this.

Some will no doubt ask, “So, what should we do? Just give up?”

The answer is interesting.

Instead of focusing on trying to forecast and prevent surprising events in the world, Taleb says that wise leaders will focus on creating a strong and resilient nation and society that isn’t hurt by surprise. In fact, he recommends that nations seek to become “antifragile,” meaning that they get even stronger during surprises and other crises.

This is how America responded to World War II, for example. Instead of weakening us, this crisis made us stronger. This happened because we were more antifragile than today. We had, on the whole, stronger families, stronger community bonds, and stronger dedication to morals. We also maintained a true free-enterprise system where anyone had the opportunity to take risks and create widespread prosperity — and many people did just that as a response to crisis.

In our current environment — where only 35n percent of all jobs are full time, and more than 48 percent of people are on welfare, food stamps, or other government benefits, and where the regulatory barriers to starting a business are much higher than fifty years ago — we are a lot more fragile.

In short, we are a nation deeply addicted to being ruled by experts. Our best future will come, Taleb suggests, by focusing on the things that make us stronger, more resilient, and even antifragile.

In my view, this means a return to genuine free enterprise, pure and simple.

The reason this works is because it incentivizes individuals, with enlightened self-interest, to take on the challenge of becoming entrepreneurs, i.e.: producers, independents and bastions of self-reliance, sharing their wealth and security with those who buy into their vision and help make it happen through intrepreneurial positions in their businesses.

Thousands of such entrepreneurs unleashed on our woes would have a leavening effect and the grassroots spread of forward-thinking innovation will put into operation the principles that govern freedom and prosperity.

We need to take a good look at our nation and government, identify areas where were we are fragile, and fix them. Government has a small but vital role to play in this, mainly in fixing our long-term government spending problem, but the majority of change must come from the American people.

The problem, as always, is that such change requires risk. This means that those who are willing to face risk and innovate must lead out — entrepreneurs, not politicians, bureaucrats, or experts.

The Washington/Ivy League/Wall Street crowd that depends on experts is extremely fragile, if for no other reason than it relies on experts whose forecasts are frequently weak.

If we are to put America on a path to a truly flourishing economy and society where every child can benefit from a rebirth of the American Dream, risk is necessary. Without great risk, there will be no great rewards.

The truth is, the most innovative entrepreneurs have already detected areas of fragility and are taking action in response — that’s what makes them innovators. But Washington seems committed to stopping all this initiative.

A national addiction to experts, and a simultaneous rejection of entrepreneurs, is a sure path to decline. This is where we now are as a nation.

The reality is that expertise thrives when there is no crisis, but crumbles in the face of surprises. Entrepreneurship flourishes in times of peace and crisis, even when it isn’t given much of a chance.

When a nation encourages entrepreneurship and the natural innovation and resilience of entrepreneurs, it becomes strong — strong when surprises come, and even if they don’t.

How do we become such a nation? Three things are needed:

1. We have to be innovators and entrepreneurs regardless of what Washington does.
2. We have to effectively stand behind those few in Washington who do take on the expert establishment and call for real change, even (especially) when it upsets the career politicians and media pundits.
3. We have to show real respect for entrepreneurs, and teach all our kids to seriously consider and admire the higher calling of entrepreneurship.

As Taleb put it,

“We didn’t get to where we are today thanks to policy makers — but thanks to the appetite for risks and errors of a certain class of people [entrepreneurs] we need to encourage, protect, and respect.”

Our solutions are simple, not complex. But the “expert-dominated” elites are trying to keep things complex in order to “justify their profession,” as Taleb said.

Innovators can do better. They always have. Carpe diem!

Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.

Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Good citizens know as much about freedom, government, economics and laws as their president, prime minister, justices, governors, senators and other officials.

When a lot of the citizens are good citizens, freedom flourishes. When only a few are good citizens, freedom declines.

This is an incontrovertible law of human history. It is always this way. No exceptions.

So, just using finances as an example, here is a basic citizen’s quiz:

1. Can you explain in detail what inflation is, what causes it, how it is related to a gold/silver standard, and how it always gives more power to the elite class and less to the middle and lower classes?
2. Can you explain the differences between free banking and fractional banking, in detail, and how the two influence societies in drastically different directions?
3. Can you explain the differences between free-enterprise banking and central banking, and what is the relationship between the government as the taxing power and the government as central banker?

These three questions in large part separate the elite ruling classes from the regular people in modern nations.

If you know these things, you understand the essence of the modern economy and can be part of the solution for your nation’s decline and the current losses of freedom. If not, you are naturally part of the problem.

The answers to these questions are clearly outlined and explained in Murray Rothbard’s book, The Mystery of Banking. It’s the quickest way I know of to quickly understand finances at the level (or higher) of our national leaders.

There is a name for a society where a small upper class understands these three questions (and a few more like them), and uses this knowledge to rule over the masses who do not understand them. It is aristocracy.

In our day it is more often referred to as elitism, meritocracy, or even democracy. Although this is not the dictionary definition of these words, it is the actual reality in every modern nation called a “meritocracy” or a “democracy.” And in truth, this system is highly anti-merit and anti-democratic.

A democratic-republican system can only last if the regular people understand finances as well as their rulers. Again, there are no exceptions to this rule in all of history.

Fortunately, just knowing the answers to these three questions flips this switch, and almost anyone, pretty much everyone, can learn these three things.

But will you do it? Or, if you already know these three answers, will you help others learn them? Only you can decide.

Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.

Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.