10/30/2008 05:12 am ET | Updated May 25, 2011

Letter to My Son

Dear Bill,

One of the benefits of age is the experience of having lived through a greater piece of history and, perhaps, learned a little from the view.

Looking at the current market meltdown, I suspect the history books will record it as a 21st century version of 1929 - 1934. In both cases, the crisis was brought on by the natural effect of unrestrained "free market" ideology. After the panics of the late 19th century, Teddy Roosevelt was swept into office on a promise to break the power of the corporations (i.e. restrict their freedom to create monopolies) and introduce some regulations on the financial markets (i.e. more restrictions on freedom). In the 1920s, we backed away from or found a way around these early regulations and the good times rolled - until the excesses became so great that people lost trust and everything began to crash in 1929. FDR laid the foundation for America's 20th century growth and creation of a middle class by severely restricting the freedom of both the financial markets and of corporations, and instituting a highly progressive income tax. During that period of high marginal tax rates (often above 90% in the top bracket)* and highly restrictive business and financial regulation, the American people and American business thrived. Indeed, during that period America passed all its international competitors and became the world's economic powerhouse.

But success engenders greed. People from all walks began to think that they would be even better off if they could get rid of taxes and regulations. So beginning with JFK, America started down the road to economic Libertarianism. "The government wastes my money, gives it to the lazy and indolent, sends it overseas as foreign aid." "I can spend my hard-earned dollars better than the government." "I earned it, what right do they have to tax it away?" "The free market is the most efficient allocator of resources."

And so we undid or sidestepped most of the regulations and tax policies that had been in place. We privatized everything including more and more of the military. We allowed mergers to create firms so large that the public dare not let them fail. We created new financial instruments that were entirely unregulated (i.e. derivatives). We truly built a lightly taxed, lightly regulated, free-market economy.

And what happened? Surprise! 1929 all over again. Same philosophy, same result.

In some important ways we are in worse shape than we were in 1929. Because natural free-market incentives so highly favor the short term, we have lost our long-term culture. Teddy Roosevelt's speeches were all about building and conserving for posterity. Today few politicians talk about posterity. Today's gas prices are more important than what kind of nation we'll hand to our grandchildren. To use a metaphor, the guy who chops down his orchard and sells the wood is much "smarter" than the guy who tends his trees and collects apples each year. So rather than launch an Apollo Project to learn how to live well with less energy, we will drill until we have drained every last drop. Rather than live within our means, we will "chop down our trees," borrow from other nations, borrow from the future, so we can consume more than we produce. It is our children and grandchildren who will pay the price.

Can we return to the selfless policies that made our nation great? Or will it take another Great Depression to wake us out of our selfish stupor? And if the latter, will the Chinese and other nations allow America to stumble yet keep the lead? Will the world still want dollars? Most importantly, will Americans make the hard choices and sacrifices necessary to regain control of our destiny - or will we succumb to the sweet talk of those who tell us not to worry?

The free-market libertarians opened the door to crooks and con-men who, in turn, are depleting America's treasury and gutting its financial system. Those guys rose to power over the last 30 years and for the last decade have had unchallenged control of the government. (For a while there was a potential challenger in the White House but they effectively neutered him.) Republican primary voters served up a nominee that promised to be a challenger. But the powerbrokers got to him and now his "team" is made up almost entirely of the same guys who have been running things the last 8 years. He is their poster boy but they will be running the show.

Sadly, neither candidate is telling us what we should be hearing. The economists tell us that over the next decade the Democrats' tax/spending plan will cost an additional $3.5 trillion, the Republicans' $5 trillion.

Can Americans rise above their immediate self interest and do what needs to be done? Or will we insist that we keep dancing on the deck of the Titanic?

That is what this election should be about.

* Note:

Partial History of U.S. Federal Income Tax Rates Since 1913
Year Top Income Bracket

1913-1915 - 7%
1916 - 15%
1917 - 67%
1918 - 73%
1919-1920 - 73%
1921 - 73%
1922 - 56%
1923 - 56%
1924 - 46%
1925-1928 - 25%
1929 - 24%
1930-1931 - 25%
1932-1933 - 63%
1934-1935 - 63%
1936-1939 - 79%
1940 - 81.1%
1941 - 81%
1942-1943 - 88%
1944-1945 - 94%
1946-1947 - 86.45%
1948-1949 - 82.13%
1950 - 84.36%
1951 - 91%
1952-1953 - 92%
1954-1963 - 91%
1964 - 77%
1965-1967 - 70%
1968 - 75.25%
1969 - 77%
1970 - 71.75%
1971-1981 - 70%
1982-1986 - 50%
1987 - 38.5%
1988-1990 - 33%
1991-1992 - 31%
1993-2000 - 39.6%
2001 - 39.1%
2002 - 38.6%
2003-2008 - 35%