I got my book through Amazon. Roughly $17. I ordered weeks ahead of publication and it arrived USPS on April 7 which was a Saturday. It was tightly rapped in cardboard and came in excellent condition. I like the cover design and the red lettering (I never seem to tire of red on books or sports jerseys). At first I didn't really like the book title, but seeing its connection to history it seems more appropriate now. The book begins with a recount of events leading to the British burning down the White House on August 24, 1814 (didn't remember learning this in History class growing up, but that's probably more due to my short attention span than my grade school teachers). It's quite fascinating in the sense this easily achieved bonfire (mainly intended as distraction) by the British was easily achieved because U.S. government budget short-falls caused by a lack of vision (or prudence) of the "Democratic--Republicans" (what would be thought of accurately as the Republican Party of that time, though in actuality a separate entity from what would eventually become the Republican Party we know today). The Democratic--Republicans had been stubborn sticklers, refusing to raise much needed taxes (otherwise known as government revenue) in anticipation of resources and salary for soldiers needed to subsist and sustain a competent army force to fight against Britain.
Kwak and Johnson are obviously trying (successfully) to draw a comparison between the inadequate taxation for the national needs of those historically crucial times (crucial to the survival of a nation in its infancy) and the extremist anti-tax sentiment held (rightly or wrongly) by a significant number of Americans today. Alexander Hamilton seems to look very heroic from the rear view mirror perspective of history. Starting around 1790 Hamilton had worked (in his position as Treasury Secretary) to improve America's fiscal policy, bringing down the debt through creation of a national bank, excise taxes, restructuring of debt, etc.... This in fact was beneficial to the nation's long-term strength, but was opposed by Thomas Jefferson and James Madison as they felt that small government vis-a-vis small taxes was the better way to go. Unlike the Republican Party of today, which mainly specializes in hateful obstructionism, Jefferson and Madison had good and mainly altruistic intentions. Nevertheless, in the lead up to an expensive and destructive war, not having sufficient government revenues to pay for that war was the wrong policy choice.
In this wonderful book, we also see other historic characters and historical parallels that may "ring a bell" in some people's minds. A Philadelphia banker by the name of Stephen Girard helped to underwrite an extremely large loan in 1813 when the U.S. Government was desperate for funds. This reminded me a little of Warren Buffett, his loan to Goldman Sachs, and also Buffett's and other experts' promotion of the idea of "CoCo" bonds (contingent convertible bonds, see here, here, and here). This allusion to Girard shows us that America long ago (during the "Founding Fathers" era often given lip-service to by the Teabaggers Party) faced situations where an extreme anti-tax policy has put America in dire straits.
If we recognize that tax revenues pay for many things that are in fact beneficial to us, it might give us a better perspective on policy decisions. Also, one might add, when the revenues are put to good use, it makes more sense to raise the government revenue in taxes (which require no interest to be paid later) than in debt, which requires interest payments. It behooves us, to raise the money from government revenue, rather than through debt. In other words, outside of temporary adjustments for economic crises and emergency situations (war, terrorist attacks), we should match tax rates (revenues) to our long-term spending needs.
Editorial aside: A fair amount for all the government services we get (in the book reviewer's opinion) might be more than 13.9% or a tax rate so low that we felt ashamed or embarrassed to reveal it. Imagine paying only 13.9% in federal tax rates and also receiving $37 million in government subsidies. Of course, $37 million received 19 years ago, would be worth much more than $37 million received in 2012. But what's a few million grafted from the Indiana "local yokels " while telling voters about your "battles" in the "free market"?? When tax dollars go to Mitt Romney, we're not taxpayers, we're all just good friends!!!
Back to the book review....
The first 3 chapters of the book largely deal in the fiscal history of the U.S., past eras' different income tax rates, and the timing of new (new at the time) government programs such as Medicare, Medicaid, Social Security etc. This is the most colorful part of the book and has more of a "human interest" aspect of the story than later chapters. I won't go over all the historical parts of the book as it's way too much fun to discover on your own, and I don't want to give out any "spoilers" to the story. But it definitely adds to understanding of our current situation and reads fast. Incidentally, I am a glacially slow reader, and I finished the 240 pages of this book in exactly 10 days, so trust me, it is a quick and fun read overall. A mild warning though, for those not into government budget minutia: the beginning of chapter 7 onward can get a little dry. But isn't it worth the effort to be a better voter and a better citizen?? Isn't it worth a little effort to go to the voting booth in November armed with deeper and substantive knowledge, gleaned from more than just an unsettling headline?? Some men and women went to wars (in their most precious years) so you could have the right to vote. Is it too much to ask, in appreciation of their sacrifice if not for your own benefit, to read a book?? Voting should be based on an intelligent choice and not a 30 second "sound-bite". If it is too much to ask, then did those soldiers die in vain for your right to vote?? Going through the motions of voting and getting a sticker on your shirt is not "patriotic" in and of itself. Voting responsibly and equipped with a deeper than surface knowledge can feel more than patriotic. It can almost feel like a spiritual experience. Deep pride for sure.
Moving on to Chapter 4, this part of the book is quite educational, and almost mandatory for the rest of the book (especially if you are a "layman" or novice on federal government budgets). This part of the book has some extremely useful terminology (some of which the authors put in bold print for easier reading). What is the difference between the words debt and deficit?? Often times it seems in the news the words debt and deficit are used interchangeably, but it's important to know the difference. What about discretionary spending vs. mandatory spending?? Do you know the difference?? If politicians throw these words at you quickly on TV, would you scratch your head in bafflement?? If you don't know the terminology or "lexicon" how can you expect to have full understanding when you go to the voting booth?? Can you get past the "fear-mongering" and "hot button" words politicians might be using just in order to manipulate your thought process?? Words are sometimes used to generate an emotional response or "stir up" voters to the point they turn off their brains. The book "White House Burning" helps you get past that!!
There are also terrific graphs in the book which show in pictorial terms the major parts of the federal budget, and also explaining how we relate % of debt in relation to GDP (gross domestic product) and how we relate % of spending in relation to GDP.
- How much of government revenues come from individual income tax vs corporate income tax??
- When you hear numbers quoted from CBO (Congressional Budget Office) can you trust them?? Are CBO numbers generally reliable to quote when discussing the federal budget and/or politics?? More reliable than the 3 times divorced recovering pill addict Rush Limbaugh when he tells you something about the federal budget??
- Is healthcare becoming more expensive because of increased government benefits or because of age demographics??
- Is it possible to cure federal deficits if you refuse to raise taxes---ever???
- If the Bush tax cuts of 2001 and 2003 were allowed to expire, would we be nearer to a deficit solution or making it unattainable??
- If Social Security and Medicare were cut or a "voucher system" was used, would you be responsible to take care of your elderly parents health bills and housing?? Who would pay for your parents' healthcare, food, heating bills if Medicare and Social Security were cut?? Would Republican Paul Ryan pay for your parents' hospital bill??
- Would Bank of America or Goldman Sachs pay for your parents' health bill?? Is Wal-Mart's employee health plan going to pay for your elderly parents' health bills??
- Which private company would come to your parents rescue in their old age if they had cancer?? Will Ford Motors pay for a home nurse to feed your father if he gets Alzheimer's disease??
- Will healthcare costs be eaten by society no matter the existence or non-existence of Medicare and Medicaid?? If government isn't paying for your Social Security, Medicare, and Medicaid then who exactly did you think was paying for those things IF IT WASN'T THE GOVERNMENT?? Tinker Bell, the Disney fairy?? Or did you think Donald Trump was sneaking off to pay your elderly parents' hospital bill during a commercial break of "The Apprentice"??
- Allowing the 2001 and 2003 Bush tax cuts to expire. (the Congress needn't pass any new laws to achieve this, just do nothing---like usual)
- Increase the earnings cap on payroll taxes (the cap is currently $106,800). 16% of the earnings now escape the payroll tax. Only 10% escaped the payroll tax in 1983. This is because of increasing salaries and also increased inequality. The authors propose the cap be indexed to cover 90% of earnings (that is to say 90% of the earnings would be taxed at either a 12.4% rate or at authors' proposed slightly increased 13.4% rate)
- Phase out (gradually) the employer health plan exclusion (tax break). This would lower demand, lower health care spending, and thereby slightly slow down health care cost inflation. Elimination of this tax break would increase government revenues by roughly 0.6%.
- Introduce a carbon tax. Authors suggest a $20 per ton of carbon dioxide which equates to (roughly) 18cents extra per gallon of gasoline.
- A 50 cent increase in the gasoline tax (which would make it $1 total). The carbon tax and gasoline taxes would probably be regressive (most of the tax would hit low-income or middle income folks) so the authors suggest a rebate offered to poor households taken from the increased revenues of the tax itself.
- A TBTF (too big to fail) fee (I love the word fee here) on financial institutions based on size and riskiness. Come on now, honest to God, think of all the times you got screwed at an ATM machine on fees (for the use of your own money) and maybe just once on an overdraft---wouldn't it be sweet as honeycomb to make your banker eat a fee?? Unlike many bank fees though, this is a legitimate fee to create a fund for future financial crisis. The fee would also discourage bankers from taking risk, as the fee would be increased as the bank increased in leverage (debt instruments) or carried garbage assets (such as sub-prime loans) on its balance sheets. For community banks or Credit Unions with conservative asset portfolios (and directly familiar with the people they loan to) the fees would be very small. Maybe the fee rate could encourage the originator of the loan keeping the loan, and therefor more conscientious about the loan origination process.
- The authors speak extensively on the elimination of what are called "tax expenditures". What are tax expenditures?? In the authors' accurate definition "Tax expenditures are laws that use the tax code as a means of distributing money to people. Tax expenditures allow individuals or companies to reduce their taxes if they do certain things that the law is trying to promote." One of the most renowned examples would be the tax deduction for interest on a home mortgage. Elimination of most tax expenditures would increase government revenues while at the same time reduce economic distortions such as the housing bubble that the mortgage deduction assisted in causing.
GrahamBroketheMold Book Rating on 1 to 10 scale, 10 being the best: 9
Positives: The book has an outstanding index, and is annotated very well. This is key for any good quality book (Check Sarah Palin's first book for index). Kwak and Johnson avoid personal attacks. The graphs in the book were used in the exact right amount, not overkill but adding visuals which made for easy grasp of budget issues which can be confusing.
Negatives: Wish there had been a little more humor in the book. Although America's budget problems are serious issues which don't exactly lend themselves to vaudeville comedy, I know at times Mr. Kwak and Mr. Johnson have a wicked sense of humor SEE HERE, and they need to unveil that humor more in their books. After all, some medical specialists might make great hedge fund managers. Be wary if your doctor mentions "active management" fees though (those last 2 sentences was a joke).
Go buy the book NOW!!!!!