Was the American Revolution worth it?
Back in 1776, the fight against taxation without representation led to the Revolutionary War and eventually America's independence from Britain. Economist Kevin Hassett wonders if it was worth it in the long run.
Kevin Hassett, director of economic policy studies at the American Enterprise Institute (leadingauthorities.com)
More on Investing, Commentaries
TEXT OF STORY
Kai Ryssdal: Believe it or not, we have been talking about tax policy in this country since before there even was a country. Anybody remember taxation without representation? Two hundred and thirty-three years ago that idea helped lead to the Revolutionary War and eventually the signing of the Declaration of Independence. Commentator and economist Kevin Hassett wonders, though, whether in the long run it was worth it.
KEVIN HASSETT: The American Revolution has always seemed like such a big deal. But looking at the economic consequences, I'm not so sure.
Our founding fathers make even the most radical tax-hating conservatives of today seem like pikers. Sure the British imposed taxes, but they were tiny. One historian estimated the combined burden of the infamous "Navigation Acts" to be 1 percent of income. With other assorted taxes, the total bite that ignited revolution was a measly 2 percent.
Imagine what would have happened if King George had recognized the small financial stakes and responded to the tax revolt with more conciliatory gestures.
How would our economic lives be different if we had never gained independence?
First let's look at the governments. The government sector in the U.K. eats up about 44 percent of their GDP. Our federal, state and local governments take about a 10 percent smaller share. But the main difference is health care, which is provided by the government across the pond. If President Obama gets his public plan, we might well end up in about the same place.
What about taxes? The top personal tax rate in the U.K. is 40 percent, 5 points higher than we have today. President Obama, however, has promised to repeal the Bush tax cuts. If he does, then our top rate will be 39.6 percent -- again, practically identical to our British friends.
The Brits have a lower corporate tax than we do, 28 percent versus 39 percent, but have higher sales taxes because of their 15 percent value-added tax. The Bank of England, just like our Federal Reserve, is an independent institution presided over by an academic economist. It's not clear that even their wives would notice if Mervyn King and Ben Bernanke switched places.
The biggest remaining difference is per capita income. Americans on average earn about $10,000 more each year. Given how small the policy differences are today, that gap will likely shrink significantly in the years to come.
If it does, then economic historians will look back at the American Revolution and conclude that it had little impact on the long-run, economic well-being of Americans.
Ryssdal: Kevin Hassett is the director of Economic Policy Studies and a senior fellow at the American Enterprise Institute in Washington.
Comments
Comment | Refresh
From Lakeland, FL, 07/04/2009
I find all of these angry people quite amusing. Yes, this story was a little out of the ordinary, but that is why I am here responding to it, because it is something to think about yet no one wants to realize--we no longer live in the country that our founding fathers envisioned. Which for the hilarity of all of us, these "upset people" speaking here seem to forget that this document only declared these rights for white males.
I do not understand why people are so naive in accepting that our founding fathers were looking out for themselves, not the country. If they did, we would have not had Manifest Destiny (destroying everything in our path), the Civil War (once more destroying everything in out path), Women's Suffrage, the Civil Rights Movement, and the Patriot Act--just to mention a few.
Are people really so ignorant to the fact that no other race and sex was part of this declaration?
And all of these years later, we are still infested with angry "Americans" telling people to “go back home.”
So yes, the United States of America’s independence has brought some positive changes to ALL alike (a few hundred years later), but one must not forget about all the laws being passed which have and will destroy this sacred document. (Which the author, I believe, hinted at in the economic sense). And as a Puerto Rican, I say thank you to the writer below for expressing such keen point to the discussion.
Wake up people, you are living a dream. Mimicking the Greeks and calling it our own is not innovative; uniting, loving, and respecting our communities, our values, and our morals is what will ultimately drive us all to a beautiful place, whether is in this country or any other piece of land around the world.
Think about it.
Be blessed, balanced, and beautiful.
07/04/2009
It all seems to boil down to taxes for Mr. Hassett and others like him who find the concept abhorrent. Today is a great day to re-read the Declaration of Independence and note the issues of human equality, freedom from authoritarian state religion and military suppression were and are at the core. Happy Fourth to all.
From Louisville, KY, 07/04/2009
The argument made by Kevin Hassett is fundamentally flawed by attempting to oversimplify the effects of the Revolution to mere economics: The goal of the Revolution was not to reduce American taxes, but to proclaim and demand the human rights necessary for men and women to live in dignity. The ripples of that Revolution changed the face of the world. And, as far as economics are concerned, we have been trading partners with Britain since the first colonists arrived, and the world has progressed to a global economic system. So, I would be surprised if significant differences did exist between Britain and the U.S. because that was never the issue: The issue was one of representation, fair treatment by the law, and the right for a distinct group of people to govern themselves.
07/03/2009
Talk about deception and half-truths. "The government sector in the U.K. eats up about 44 percent of their GDP. Our federal, state and local governments take about a 10 percent smaller share." No, the share our government takes up is 10 percentage points smaller, a huge difference.
Conservative ideologues like to point to our high corporate income tax, but ignore the fact that the actual taxes our corporations pay is among the lowest in the world.
Just more recycled lies from the American Enterprise Institute.
07/03/2009
Those taxes that were mentioned, were to pay for the defense of America. The British Crown had defended America in a world war--yes, they existed before America did--against the French.
Remember the French and Indian war? Colonies were the battlefronts, which is why the French saved Washington's bacon at Valley Forge, where the "summer soldiers" were deserting nightly.
Some of America's wealthy just didn't want to pay. And as a colony, why did we need representation? Do we allow the District of Columbia, Puerto Rico et al to represent themselves?
07/02/2009
This didn't seem up to the usual rigorous standards of Marketplace. Mr. Hassett cherry-picked some convenient facts of the moment, combined them with half-truths and what appears to be marshmallow fluff, and presented it as a historical exercise, all to make a broad (and transparently biased) point that is completely unsupported by the materials he gathered. Yes, the top marginal tax rate is now approximately the same as England's, but it's still less than half of what it was here at its peak in the cold war, so you would be just as (in)correct to extrapolate it eventually decreasing to zero. None of which actually tells you anything meaningful or true about where we are now compared to in 1775. I suppose abandoning the gold standard is still Obama's fault, but you have to draw the line somewhere.
From Los Angeles, CA, 07/02/2009
I agree with Ken, that we lost the freedoms of 1776 and gained back some of the fascism of England. But what about Freedom of Speech? England doesn't have that, or a separate Judiciary, which is worth mentioning before pledging Allegiance to the Queen of England. Its also worth mentioning that the Navigation Act, Currency Act, etc, were not about taxes. In fact, the Boston Tea Party was about corporate monopoly and independent tea distribution. Its pretty well described on the Wikipedia entry. The whole premise to this story is faulty.
From Great Barrington, MA, 07/02/2009
I think Emma missed the whole point of the commentary. If you want to see where we will be in the future,look at England. Did we ever really gain our freedom? The founding Fathers fought against a private central bank but now we have the fed which is capitalized by very wealthy people including Europeans, are they looking out for our interests or theirs? Isn't the congress and congress alone supposed to have the power to coin money?
Enron started in England,as did nationalization of industries that we seem to be doing now. So ,Emma , perhaps you should read a little more history.
From Brooklyn, NY, 07/02/2009
Kevin Hassett, Young intelligent man, you need to read your history again. "Taxation without Representation!" was the call of the American Revolution. The issue was not the tax per se but the fact that the "colonies" did not have say in how the they were taxed, how the taxes where spent or what was taxed! The conflict and "revolution:" was not about the amount of the, son, but the processes of taxation and whether or not people had the right to determine how and what taxes applied and were used. I find this commentary really lacking in historic fact or analysis. Which is usual for Market Place. Perhpas Mr. Hassett should go back to school.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.