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America’s Success Story is Due to a Little-Known Clause in the Constitution

September 17, 2021 By Ned Piplovic Leave a Comment

By Mark Skousen

Today is Constitution Day, the anniversary of the day members of the Continental Congress signed the US Constitution on September 17, 1787.

There are several extremely important clauses in the Constitution that very few scholars recognize but which destined America to become the superpower that it is today.

Here is my short column on this breakthrough principle in a recent Skousen CAFE:

Canada Closes Its Borders for No Good Reason

We received a call from a Canadian couple who said that they had to cancel coming to FreedomFest. They wanted to attend “the greatest libertarian show on earth,” but the Canadian authorities have decided to close the border to all “non-essential” travel.

Which raises an interesting question: Why were the Canadian and Mexican borders closed in 2020 and 2021, while the borders between states remained open?

Even now, while Americans can travel or move freely between states from coast to coast, they cannot travel to and from Canada and Mexico.

Did the pandemic suddenly stop at the borders?

The reason is simple to explain, but often involves a principle taken for granted by American citizens: The United States Constitution does not allow state governors to close their borders to adjacent states. Countries can do it, but not states.

None of the 50 states can keep you from visiting, moving or working in another state. They cannot keep you from transferring money, capital or goods to another state. They cannot require a passport for you to enter their state. They cannot impose any import or export duties between states.

The only exception is for the inspection of fruits and vegetables, something California does.

It’s All in The Constitution Section 9 and 10 of Article I of the U.S. Constitution is clear:

“No Tax or Duty shall be laid on Articles exported from any State.

“No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another.

“No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws.”

And Article 4, section 2, states:

“The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.”

Finally, the 14th Amendment states:

“No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

Creating a Gigantic Free-Trade Zone from Coast to Coast

That’s why we are called the United States of America. The uniting of the 50 states economically is a major reason why America leads the world as an economic powerhouse. It has created a gigantic free-trade zone from coast to coast.

Ancient Rome had a similar arrangement. There were no trade restrictions inside the Roman empire; it was one reason the Roman empire lasted so long.

Recently, European nations have attempted to imitate our success with the creation of the European Union, sometimes called the “United States of Europe,” along with a single currency, the euro — to create a large free-trade zone of money, labor and capital.

Does the Constitution Limit or Expand State Powers? On the other hand, Article I, Section 8, grants extremely broad powers to Congress — to print money, expand credit, level taxes and import duties and declare war. You can drive a truck through section 8 of the Constitution.

As George Washington allegedly said, “Government is a dangerous servant and a fearful master.”

At this year’s FreedomFest, we had a big debate on “The Constitution: Conceived in Liberty or Conspiratorial Coup?” We debated libertarian Murray Rothbard’s controversial contention that the Constitutional Convention of 1787 was a power grab to dramatically increase the state’s control of the new nation.

Professor Patrick Newman, a fellow of the Mises Institute, argued in favor of Rothbard’s thesis, that James Madison called the Convention to secretly expand the power of the state. He was followed with commentary by legal authorities John Norton Moore (University of Virginia) and Anastasia Boden, senior attorney for the Pacific Legal Foundation, who defended the Constitution. It was an electrifying debate.

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Happy Constitution Day!

In liberty, AEIOU,

Mark Skousen

Are We Rome?

September 13, 2021 By Ned Piplovic 2 Comments

By Mark Skousen

Talk delivered on Saturday, September 11, 2021, Kimber Academy in Lehi, Utah and Liberty United Festival in Vineyard, Utah

“History does not repeat itself, but it does rhyme.” – Mark Twain

“In the end, there was no money left to pay the army, build forts or ships, or protect the frontier. The barbarian invasions were the final blow to the Roman state in the fifth century, [caused] by three centuries of deterioration in fiscal capacity…”
— Bruce Barlett, “How Excessive Government Killed Ancient Rome,” Cato Journal (1994)

It was 20 years ago today that my wife and I arrived in New York, where I was installed as president of the Foundation for Economic Education (FEE), and witnessed first hand the 9/11 terrorist attacks. It was an unforgettable day of infamy, and has so affected our culture, our liberties and our lives that we observe the date every year.

Looking back, one thing I remember the most was that New Yorkers and Americans in general were completely unified in spirit at this time. For months, residents posted pictures of family members who had died on 9/11. Everyone was kind and friendly, like we were brothers and sisters in this together. A few weeks later, I carried a large box of books downtown, and a New Yorker offered to help carry the box up the stairs from the train station.

The other thing that I noticed is the street vendors in New York never displayed or sold post cards or pictures of airlines flying into the Twin Towers. They respected the depth of sorrow after this event.

The City was shut down for some time and everyone in the New York tried to access the damage and further threats to our security. Smoke filled the city, businesses closed and events were canceled.

The first decision I had to make as the new president of FEE was to determine if we should cancel our annual Liberty dinner scheduled in October. Our keynote speakers was Paul Gigot, the new editor of the Wall Street Journal, and I couldn’t even get a hold of him. (The Journal had moved their headquarters temporarily from Wall Street across the river to New Jersey.)

I gathered my staff the next day to make the decision. Most staff members thought we should cancel or postpone the Liberty dinner. Our phones were quiet. Nobody was calling in to sign up for the dinner. I thought about it, and then said, “My first act as president of FEE is not going to cancel our annual dinner. If that means just all of us sitting around the kitchen table, then so be it.”

It was the right thing to do. Within a week the phones started ringing again, and we had a full crowd of over 200 people at the Harvard Club in October, and Paul Gigot showed up and we had a big success.

Since then, many friends of liberty have asked the question, “Are our freedoms in jeopardy? Is America in decline like ancient Rome?” I have a dozen books on ancient Rome in my library, and after Jake Oaks, the producer of the Liberty United Festival asked me to speak on this topic on 9/11, I read through these books, including Edward Gibbon’s classic 6-volume work, The Decline and Fall of the Roman Empire, published in 1776.

We decided to debate this question at FreedomFest in 2013.

Our theme at FreedomFest was “Are We Rome?” to be held appropriately at Caesar’s Palace in Las Vegas. We had a record turnout that year.

To introduce the theme, we showed this 3-minute. Watch it here: Are We Rome? FreedomFest 2013 on Vimeo

We had quite a group of speakers on this topic:

Steve Forbes, author, “Power Ambition Glory: The Stunning Parallels between the Ancient World and Today.”

Lawrence W. Reed, president of FEE, “The Fall of Rome and Modern Parallels.” (Afterwards, he spoke numerous times around the country on this question, and write a pamphlet, “Are We Rome?” published by FEE: https://fee.org/resources/are-we-rome-by-lawrence-w-reed/)

Marc Eliot, Hollywood’s #1 biographer, on “Ben Hur, Spartacus, Cleopatra, Gladiator: Epic Films of Roman Times.”

Paul Cantor, University of Virginia professor of English literature, on “Empire and the Loss of Freedom: What Shakespeare’s Rome Can Tell About Us.”

Doug Casey (author and investment writer) vs. Harry Veryser (economist at the University of Detroit-Mercy and Catholic historian) will debate “Did Christianity Cause the Fall of Rome?”

Pat Heller, Liberty Coin Co., “The Rise and Fall of Rome’s Money — And What It Means for America Today.” He has samples of Roman coins to show attendees.

David Boaz, Cato Institute, “George Washington, a Modern-day Cincinnatus: The Man Who Would NOT be King.”

Jo Ann Skousen, professor of English literature at Mercy College and director of Anthem film festival, on “Greek and Roman Mythology in 50 Minutes.”

Jim Gwartney and Randy Holcomb (Florida State economists): “The Decline of Economic Freedom in America: Are We on the Path to Rome?”

Tom Palmer: “Rome’s Last Citizen: The Life and Legacy of Cato, Mortal Enemy of Caesar” and “Cicero: The Life and Times of Rome’s Greatest Citizen” — Tom is always knowledgeable on all things historical.

J. C. Bradbury, top sports economist (Kennesaw State University), on “Who Are The Modern-Day Gladiators? Sports as an Alternative to War.”

Valerie Durham, Isadora Duncan dance instructor, “Music and Dance in Roman Times.”

We are Different….

Of course, we are different from ancient Rome in a thousand ways. Theirs was largely agrarian. Our standard of living and technological advances are 100 times higher than the average Roman citizen of 2000 years ago. Life expectancy was only 41 for Roman men and 29 for women. Life was cheap. Over half the population in the Roman empire were slaves. Women could not vote. Romans worshiped a plurality of gods, and only became Christian near the end. They loved blood sports where for entertainment the masses enjoyed watching slaves and gladiators and even Christians die. Dictators often killed their enemies (Cicero and Cato being prime examples.)

There was virtually no middle class – only rich and poor. After the republic, Rome was ruled mainly by tyrants and dictators. And Roman leaders like Caesar and Augustus would be baffled by how the United States treated the conquered nations of Germany and Japan after World War II. Finally, we are babes in the woods compared to Rome. Our republic has lasted nearly 250 years; Rome lasted 1,000 years.

…And We Are Alike

But in other ways, we are much like ancient Rome. Both nations were born in a revolt against monarchy – the American colonies against a British sovereign, Rome against its own kings – and replaced it with a republic. Like Rome of old, America dominates the world militarily, culturally, and economically. American English is the language of commerce and science. Like ancient Rome, we are a melting pot of ethnic groups. Fifty states are united into a gigantic free-trade zone, and we’ve enjoyed decades without world war.

As Adam Smith once said, “Little else is required for a nation to go from the lowest barbarism to the highest level of opulence but peace, easy taxes and a tolerable administration of justice.”

Books and Speeches on Ancient Rome and Today

The question “Are We Rome?” remains a popular debate topic for Americans since we became a superpower in the 20^th century. Hollywood, in particular, has been fascinated with the story of ancient Rome, and many films with Roman themes have become classics, such as Ben Hur, Spartacus, and Gladiator.

I have the first edition of a book, The New Deal in Old Rome, published by Alfred A. Knopf in 1939, in which the author, H. J. Haskell, a reporter for the Kansas City Star, contends that the decline and fall of the Roman empire was being reenacted in the United States after we went off the gold standard, adopted a welfare state, and pursued world war.

“The spending for non-productive public works, for the bureaucracy, and for the army, led to excessive taxation, inflation, and the ruin of the essential middle class and its leaders,” Haskell writes in the preface.

The book proved to be a bestseller at the beginning of World War II.

The latest book is Are We Rome? The Fall of an Empire and the Fate of America, by another journalist, Cullen Murphy, published in 2007 by Houghton Mufflin.

He answered, “Are we Rome? In important ways we just might be. In important ways we’re clearly making some of the same mistakes” (p. 206).

Benefiting from Roman Traditions

It’s worth pointing out that America has drawn upon many Roman traditions. I have a book entitled “Why We’re All Romans,” by historian Carl J. Richard. He notes the following: We use the Roman alphabet (rather than Greek, Chinese or Arabic). Our months of the year, from January to December, are Roman. July is named after Julius Caesar, August from Caesar Augustus. Christmas grew out of an ancient Roman pagan festival honoring the agricultural go Saturn. Most of the most influential Christian philosophers, including St Paul and Augustine, were Roman citizens. The Bible was translated in the Latin Vulgate, and Latin was the official language of the Catholic mass until the 1960s.

Fortunately, the West rejected the cumbersome Roman numerals and replaced them gradually with the far more productive Arabic numerals. Ah, the benefits of cultural appropriation!

The founders adopted many aspects of Roman law and politics, and the early years of the Roman republic were an inspiration to the American Constitution. We have a Senate representing an upper-class group of legislators, and an assembly elected by the people (House of Representatives). Rome and the United States share the symbol of the eagle (but so did the Nazis). Our government building and Capitol are often an imitation of Roman architecture.

The Rome That We Admire

The founding fathers were familiar with the history of the Roman empire and often sought to imitate their good traits.

There are aspects of Roman leadership that we greatly admire, such as their building of their roads, bridges and aqueducts. At the height of the Roman Empire, they had 370 separate highways stretching 53,000 miles, about the length of the US interstate system. The roads were built to last, paved of stone and iron, and 10 feet deep. Can we say the same for America’s infrastructure? Many Roman roads, bridges and aqueducts can still be seen today, an engineering wonder. How many presidents can say, as Augustus Caesar did, “I found it brick and left it marble”?

We admire the Roman Empire as a gigantic free-trade zone, and even though Augustus Caesar was a dictator, he lived frugally and modestly, and focused on a competent and efficient administration.

For a period of time, Rome allowed free speech. Anyone could criticize the emperor as long as he spoke inside the Forum.

It has been a tradition to write or speak on liberty when visiting the Forum. In 1854, John Stuart Mill and his wife Harriet visited the Forum and Mill came up with the idea of writing his libertarian tract, On Liberty, published in 1860. In 1954, Friedrich Hayek followed in Mill’s footsteps and at the Forum decided to write his book The Constitution of Liberty, published in 1960. Continuing this tradition, in 2009 I wore a toga and spoke freely in favor of “persuasion over force” in the Roman forum. See Persuasion vs. Force – MSKOUSEN.COM

Rome depended on the rule of law based on the Twelve Tables. The United States created a Constitution that drew upon the ideas of Roman statesmen, including the idea of representative government, checks and balances, a judiciary, and limits (veto power) on our leaders.

The founders admired the great statesmen, military leaders, orators, and philosophers from ancient Greece and Rome. George Washington admired Cincinnatus, the Roman general who twice rescued Rome from attack, and each time retired to his farm. John Adams sought to imitate Cicero, the famous orator, and Cato, the Young, public servants who spent their career battling the likes of Julius Caesar. “Pushed and injured and provoked as I am, I blush not to imitation the Roman [Cicero],” said Adams.

King George III was compared to Julius Caesar. “We will have no Caesars in this country!” declared Benjamin Rush.

One of the purposes of the US Constitution was to contain the power of ambitious and avarice leaders. Benjamin Franklin warned, “We see the revenues of princes constantly increasing, and we see that they are never satisfied, but always in want of more. I am apprehensive, perhaps too apprehensive, that the government of these states may in future times, end in a monarchy, and a King will sooner be set over us.”

Lessons from Rome’s Mistakes

What lessons can we learn from Rome’s decline and fall?

The founders saw that ancient Rome had no succession plan. During the 2^nd and 3^rd centuries, 23 emperors were murdered. It was always uncertain who would take their place. The American founders provided a way to get rid of bad rulers through the impeachment process, and if a president died in office, to replace him with the vice president.

Ancient Rome had a constitution based on a powerful devotion for centuries to custom, precedent and consensus, but which was not written. That make it easier for an overzealous politician to bent the rules or simply disobey them. For centuries Rome had two consuls running the government who were elected each year, and there were term limits. But at the end of the Republic, ambitious generals ignored this tradition and sought to become dictators for life.

This was one reason the founders insisted on a written constitution, although even then we know how easy it is to get around it.

Historians point to over 200 reasons for Rome’s fall. Rome destroyed itself internally and externally. Gradually its citizens became rich and decadent, demanding more free benefits from the government. “Bread and circuses” were the rallying cry. The welfare program offered free grain, olive oil and wine, and eventually eliminated a means test so that everyone qualified.

Internally, the growing and expensive welfare state destroy not only destroyed the character of the Roman citizens, but its fiscal sanity. The welfare state led to confiscatory taxation, excessive debt, inflation, and wage-price controls.

We Americans are no fans of excessive government bureaucracy that Rome was famous for – tax collectors, administrators and soldiers were all a drain on the economy, and eventually leading to runaway inflation (coin clipping), and draconian wage and price controls edict under Diocletian in 301.

Ancient Rome was also done in by costly foreign wars. Just as Rome spread itself too thin around the ancient world, today the United States has 2.5 million troops stationed at over 700 bases in sixty countries.

Will America split in two like Rome did into East (Constantinople) and West (Rome)?

Mindful of these destructive policies in ancient Rome, our founders created the US Constitution to reduce the chances that America would follow the same fate. Unfortunately, the Constitution can only do so much.

As a student of history, I conclude that it is premature to say America is destined to collapse like the Roman empire. But we are headed in that direction. We are in many ways in decline. Certainly China – the most serious threat to America’s dominance as the world’s #1 military and economic prowess – believes that the West is in decline and is doing everything in its military and economic power to take its place and achieve world domination by 1949, the 100^th anniversary of the Communist takeover of China, what President Xi Jinping calls “the long game.”

To summarize my view, I’m reminded of the story of a young man who approached Adam Smith, the venerable professor of moral philosophy at Glasgow University, and author of “The Wealth of Nations.” The young man informed Dr. Smith that the British had lost to the Americans at Sarasota in 1777, a turning point in the War of Independence, and declared, “We are lost!” To which Adam Smith replied, “There is much ruin in a nation.”

There’s a great many good people residing her in America; let’s not sell America short.

But let us not be blind to our growing problems. We are in the early stages of decline, but there is no reason why we can turn things around. All we need to for good men and women to fight for our rights and our liberties. To quote a line from Shakespeare’s Caesar, “The fault, dear Brutus, is not in our stars, but in ourselves.”

Interestingly, the first Roman king was named Romulus. Fittingly, a thousand years later, the last emperor of Rome was also named Romulus. So beware if we have a future president by the name of Washington.

While Inflation Threatens, the U.S. Economy is Firing on All Cylinders

June 24, 2021 By Ned Piplovic Leave a Comment

Washington, DC (Thursday, June 24, 2021): On June 24, 2021, the federal Bureau of Economic Analysis (BEA) released data for the first quarter 2021 Gross Output (GO) – the most comprehensive measure of total spending in the economy, including the supply chain. The data reveled that Gross Output advanced significantly in the first quarter 2021 and dramatically outpaced GDP growth for the same period. Many economists feared a long economic downturn and marginal growth in the aftermath of the sharp economic decline in the second quarter 2020. However, it appears that the second-quarter downturn was just a short term reaction to the 2020 economic slowdown caused primarily by government restrictions and business shutdowns in responses to the COVID-19 epidemic. Another quarter of economic data indicates that the U.S. economy continues to fire on all cylinders and maintains a steady growth trend. After fourth-quarter expansions of 6.1% and 10.6% in nominal terms, GDP and GO expanded even faster in the first quarter 2021 at 10.5 and 16.1%, respectively. In real terms, GDP grew 6.4% and GO expanded 8.9% in the first quarter 2021. The nominal adjusted gross output, which includes an additional $9 trillion in gross retail and gross wholesale activity omitted from the official government’s GO figures, advanced nearly 20%, which is equivalent to an 11.5% expansion in real terms. While the rising GDP is still approximately 1% short of its all-time high from Q4 2019, both GO and Adjusted GO (GO*) reached new all-time highs in Q1 2021. Moreover, GO* broke above $48 trillion in real terms and above $42 trillion in real terms for the first time ever. The positive economic growth figures released today further solidify a steady economic recovery. As more states lift business restrictions and reopen their economies, economic stability appears more likely, which should translate to a continuation of the current economic expansion. At the end of May, the U.S. crossed the 50% mark in terms of population share that has received at least on dose of COVID vaccination. This is just another factor that will provide people with confidence to resume normal economic activities and fuel economic growth. While first quarter results paint a mostly positive picture, we are concerned that inflation will threaten the recovery. Based on the comparison of nominal and real GDP and GO figures, the annualized inflation in the first quarter 2021 exceeded 8%, which is significantly higher than reported annualized CPI inflation figure of 1.7%. Another indication that the economic pullback last year was only a temporary event is the relationship between the GO and GDP decline during that period. Earlier stages of production are generally more sensitive and more volatile in their response to economic disruptions. Therefore, during past recessions, GO commonly declined significantly more than GDP, which captures only final outputs in the economy. For instance, GO declined more than 26% during the last quarter 2008. In the same period, GDP pulled back less than 8%. The 2020 economic slowdown broke from this pattern and saw GO decline at similar rates as the GDP. Over the last two quarters, GO has been recovering and expanding faster than GDP. This anomaly from the established historical pattern, provides another indication that the underlying business fundamentals are significantly stronger than originally anticipated, that government shutdowns in response to the COVID-19 epidemic might have been unnecessary. Those responses might have even amplified the initial economic contraction in the second-quarter 2020. More importantly, as it did during the fourth quarter, business spending continued to outpace consumer spending in the first quarter 2021.

Business – Not Consumers – Drives the Economy

Contrary to views of many academic economists and wide-spread media reports, consumer spending does not drive the economy, and does not represent two-thirds of the economy. Using GO as a better and a more accurate measure of total spending in the economy, the business sector (B2B spending) is almost twice the size of consumer spending. Consumer spending is the effect, not the cause, of prosperity (Say’s law). Therefore, our business-to-business (B2B) index is very useful for gauging the economy’s underlying health and the readiness to rebound after economic downturns. The B2B Index measures all the business spending in the supply chain and new private capital investment. In the first quarter 2021, nominal B2B activity expanded more than 23% to $28.3 trillion. At the same time, consumer spending grew 14.7% on an annualized basis to $14.1 trillion. In real terms, B2B activity expanded at an annualized rate of 18.7% to $24.5 trillion and consumer grew 7.2% to 13.3 trillion.

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain,” stated Skousen. “After recovering from the decline in the first half of 2020, business activity continued its expansion and followed of 39% and 12% real-term growth in last two quarters of 2020, with an 18.7% advancement in the first quarter 2021.”

GO Increase Outpaces GDP Growth in Third Quarter to Indicate Potentially Accelerated Economic Recovery

Despite significant declines in the first two quarters of 2020, Gross Output indicates robust long-term growth. Prior to what appears to be merely a short-term pullback, GO delivered steady quarterly growth over the previous 42 consecutive periods. Gross Output growth slowed in late 2019, which could have been an early sign of economic slowdown even before the pandemic and government shutdowns in early 2020. However, GO’s quick recovery in the past three periods indicate that, barring any new “black swan” events, the robust economic growth is likely to continue for the remainder of 2021. Gross Output is a leading indicator of what GDP will do in the next quarter and beyond. As David Ranson, chief economist for the private forecasting firm HCWE & Co., states, “Movements in gross output serve as a leading indicator of movements in GDP.” The federal government will release the advance estimate for second-quarter 2021 GDP on July 29, 2021 and the full release of Gross Output, as well as the third estimate of GDP on September 30, 2021. Important Note: We are hopeful that in the near future, the BEA will release GO at the same time as the first estimate of GDP for the quarter, not the third estimate.

Report on Various Sectors of the Economy

After the general decline in the first two periods 2020 and a robust recovery in the second half of that year, almost all economic sectors continue to expand in the first quarter 2021. After reversing a down trend from the previous three-quarters and expanding at nearly 10% in Q4 2020, the mining sector cooled off and grew at an annualized rate of 0.5% in real terms for the first quarter 2021. The main driver for this tepid growth is a 13% decline in the Oil and gas extraction sub-segment, which expanded at more than 5% in the previous period. While expanding more than 20% in the first quarter, the other mining operations in this segment could not compensate for the decline in the oil and gas extraction, which accounts for more than 80% of the overall Mining segment. Despite accounting for just 1.7% of the overall economy, mining represents the earliest stages of production. Therefore, we watch the expansion and contraction of the Mining segment as early indicators of what other sectors further down the supply chain might do in subsequent periods. The Agriculture sector was 5.6% smaller than in the previous period and was one of just three the three segments that experienced contractions in Q1 2021. Manufacturing – which is the second largest segment of the economy with an 18% share – reversed its one one-quarter growth of 5.7% from the previous period and declined 3.7% in Q1. While accounting for approximately half of the segment, Nondurable goods contracted nearly 7% and Durable goods diminished 1%. The third declining segment this period was Educational services, health care, and social assistance. While 8.6% higher for the period, the Education sub-segment accounts only for 12.5% of the overall segment, so the 2.9% decline in healthcare and social assistance – 87.5% share of the category – drove the overall segment’s 1.5% contraction. On the positive side, the remaining 14 out of 17 industries expanded at least 5%. The largest segment of the economy, Finance, insurance, real estate, rental, and leasing, which accounts for one-fifth of GO, built on its 5% expansion in the previous period and grew 10.2% in Q1 2021. Real estate rental and leasing sub-segment contributed to that growth by expanding nearly 4%. However, the Finance and insurance sub-segment grew more than 18%. One point of caution amid positive results is that the sub-segment with the highest growth rate – 20.65% – in this industry segment was Federal Reserve banks, credit intermediation, and related activities. However, the largest sub-segment – Insurance carriers and related activities – grew at 20%, which should lessen some of the concerns from Federal Reserve activities. The Construction sector could not maintain its growth of nearly 12% from the previous period, bust still expanded 5.4% in Q1 2021. The Transportation and warehousing sector maintained its high growth rate and followed its 17.4% rate from Q4 2020 with a 17.7% expansion in the first period 2021. After nearly doubling in the prior period, Transit and ground passenger transportation sub-segment pulled back 20%. However, this pullback was offset by other modes of transportation that continued to expand at rates similar to the previous period. Water transportation volume improved 19.4%, trucking expanded 4.9% and Air transportation grew 63.2%. Unfortunately, after no expansion in Q4 2020, government spending kicked into high gear in the first quarter 2021. While State and local spending advanced at a modest 1.5%, Federal spending surged more than 15%. While the federal government’s growth rate is significantly higher, State and local government spending accounts for two thirds of total government spending. Therefore, the State and local government’s modest spending increase kept the combined government spending increase below 6%. Within Federal spending, Defense spending declined 4.4%. However, Nondefense spending was 51.4% higher than in the previous period.

Gross output (GO) and GDP are complementary statistics in national income accounting. GO is an attempt to measure the “make” economy; i.e., total economic activity at all stages of production, similar to the “top line” (revenues/sales) of a financial accounting statement. In April 2014, the BEA began to measure GO on a quarterly basis along with GDP. Gross domestic product (GDP) is an attempt to measure the “use” economy, i.e., the value of finished goods and services ready to be used by consumers, business and government. GDP is not quite the same as the “bottom line” (profit, or net income) of an accounting statement, but rather the “value added” or the value of final use. GO tends to be more sensitive to the business cycle, and more volatile, than GDP. .

About GO and B2B Index

Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out the supply chain and business to business transactions in the production of intermediate inputs,” he notes. “That’s a big part of the economy, bigger than GDP itself. GO includes B2B activity that is vital to the production process. No one should ignore what is going on in the supply chain of the economy.” Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). A new third edition was published in late 2015, and is now available on Amazon. Click here: Structure of Production on Amazon The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is a major achievement in national income accounting. GO is the first output statistic to be published on a quarterly basis since GDP was invented in the 1940s. The BEA now defines GDP in terms of GO. GDP is defined as “the value of the goods and services produced by the nation’s economy [GO] less the value of the goods and services used up in production (Intermediate Inputs or II].” See definitions at https://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U. S. National Accounts, “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.” Skousen adds, “Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and the business cycle, and demonstrates that business spending is more significant than consumer spending,” he says. “By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds that is often reported by the media. As the chart above demonstrates, business spending is in fact almost twice the size of consumer spending in the US economy.”

For More Information

Steve Forbes: What’s Ahead podcast. In this podcast, Steve Forbes discusses Gross Output with Mark Skousen on September 9, 2019: https://www.forbes.com/sites/steveforbes/2019/09/09/were-using-the-wrong-measure-gdp-to-gauge-the-economys-real-health-mark-skousen/#35ff3d9a52fa GO-Day podcast discussion panel hosted Mark Skousen that included Steve Forbes, Sean Flynn, Steve Hanke, and David Ranson, September 30, 2020: https://chapman.zoom.us/rec/share/KJ17YjuR_6zthmgOA5fNprv2e65F-jICOsf430bJvnu8qWzdPYPfTohPC48qRLe9.Q8rmnlXynnTN74Tv?startTime=1601488807000 The GO data released by the BEA can be found at www.bea.gov under “Quarterly GDP by Industry.” Click on interactive tables “GDP by Industry” and go to “Gross Output by Industry.” Or go to this link directly: http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=3&isuri=1&5102=15 For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following: Mark Skousen, “If GDP Lags, Watch the Economy Grow,” Wall Street Journal, April 24, 2018: https://www.grossoutput.com/2018/04/26/away-go-economy-growing-faster-expected/ Mark Skousen, “At Last, a Better Way to Economic Measure” lead editorial, Wall Street Journal, April 23, 2014: http://on.wsj.com/PsdoLM Steve Forbes, Forbes Magazine (April 14, 2014): “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal”: http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/ Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”: http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-ne w-way-to-measure-the-economy/ Steve Hanke, Globe Asia (July 2014): “GO: J. M. Keynes Versus J.-B. Say,” http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say David Ranson, “Output growth data that the economy generates months earlier than GDP,” Economy Watch, July 24, 2017. HCWE & Co. http://www.hcwe.com/guest/EW-0717.pdf Mark Skousen, “Linking Austrian Economics to Keynesian Economics,” Journal of Private Enterprise, Winter, 2015: http://journal.apee.org/index.php?title=Parte7_Journal_of_Private_Enterprise_vol_30_no_4.pdf To interview Dr. Mark Skousen on this press release, contact him at [email protected], or Ned Piplovic, Media Relations at [email protected]

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[1] The BEA currently uses a limited measure of total sales of goods and services in the production process. Once products are fabricated and packaged at the manufacturing stage, the BEA’s GO only adds “net” sales at the wholesale and retail level. Its official GO for the 2021 1st quarter is $39.5 trillion. By including gross sales at the wholesale and retail level, the adjusted GO expands to $48.6 trillion in Q1 2021. Thus, the BEA omits more than $9 trillion in business-to-business (B2B) transactions in its GO statistics. We include them as a legitimate economic activity that should be accounted for in GO, which we call Adjusted GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

Fun Things to Do at FreedomFest This July

June 23, 2021 By Ned Piplovic 1 Comment

We already have more than 2,000 registered attendees for FreedomFest next month. We could have a record this year. Over a hundred people are signing up every week.

Our line-up of speakers, panels and debates can’t be beaten. Our entire program has now been posted online. See 2021 Agenda — FreedomFest.

But there’s more! We always have a lot of fun events and activities for attendees and family members every July. I went through the entire program and made a list of all the unusual things going on.

They include:

South Dakota is offering some great excursions, including:
- trips to the Mount Rushmore lighting ceremony,
- Chief Crazy Horse Monument, Deadwood (where Wild Bill Hickok was murdered),
- Custer State Park,
- an 1880s-style train ride through the Black Hills and
- incredible views of the Badlands.

Unique sessions at FreedomFest, such as:
- “God is a Mathematician” by Daniele Struppa (president of Chapman University and a professional mathematician)…
- “How to Make Your Book #1 on Amazon” with Marji Ross (former publisher of Regnery Books) and marketing genius Michael Beas…
- “The Golden Age of Jazz: celebrating 100 Years of America’s Unique Art Form” by jazz enthusiast Gary Alexander…
- Professor Ken Elzinga on “Fifty Years and 50,000 Students at Mr. Jefferson’s University: A Professor’s Reflections on Academic Freedom”… and
- Mark Skousen’s own Saturday breakfast topic, “Puzzles & Paradoxes in Money and the Economy” based on my popular college course at Chapman.

Special events and activities happening at FreedomFest events, such as:
- Wednesday Evening Opening Cocktail Party and special activities in the exhibit hall
  - including our very own libertarian magician Peter Studebaker,
  - Mark Skousen’s “White Mates in Two” chess problem, and
  - Pablo and Hayley entertaining us with music and song…

Also don’t miss the #1 most popular Native American band “Brule” at the our Saturday Night Gala Banquet.

Our Wednesday Opening Cocktail Party is just four weeks away, but there is still time to register.

Go to www.freedomfest.com, or call Hayley at 1-855-850-3733, ext. 202, to register or get more information. Use Eagle50 code to get $50 off.

We just added a new group of hotel room blocks, so I recommend you act now to avoid being disappointed.

But, Wait there is more

We also have a special private reception reserved only for subscribers of my investment news letter — Forecasts & Strategies — and my other investing services.

Furthermore, subscribers to my newsletter and trading services get a 2021 American Eagle silver dollar and a signed copy of “The Maxims of Wall Street” at this special Eagle private meeting on Thursday, July 22.

But, hurry, The room at the historic Alex Johnson Hotel (where Ronald Reagan and five other presidents have stayed) is limited to 250 subscribers and we are almost full.

Where’s Walter Lippmann when we need him?

April 21, 2021 By Mark Skousen Leave a Comment

Columnist and author Walter Lippmann (1889-1974) was considered the most influential journalist of the 20th century.

Who is the Walter Lippmann of our day? Richard Rahn, who writes for the Washington Times, comes the closest. He focuses on ideas and problems, and avoids the politically divisive “left-right” labels. I highly recommend his columns: https://www.washingtontimes.com/staff/richard-w-rahn/

Lately I’ve been reading “The Good Society,” by Walter Lippmann (his best book), and see that he was highly influenced by Mises and Hayek, so that he rejected socialist central planning….although he supported Keynesian monetary and fiscal policy.

Here is a short summary of his approach:

“Lippmann’s style was distinctive and very effective with his audience. He did not patronize and was resolutely nonpartisan. He supported candidates for public office whose positions pleased him regardless of party affiliation. He could and often did change his mind about people and politics. He read widely and made every effort not to be identified with any group or ideology. For example, although he drew from both traditions he was careful not to present himself either as a Keynesian or an Austrian. He was often impatient and he tended to become disillusioned quickly with politicians after they had been elected, especially presidents of the United States.

“Often he experienced and reflected upon a problem well in advance of bringing it to his readers. He preferred to make use of theory only after he had gathered a lot of empirical evidence….His style was to lay out his arguments simply and without jargon.

“It is impossible to gauge precisely Lippmann’s influence upon his readers, but it must have been substantial. Indeed, it seems he could help to make or break a political career, and he could speed or retard the passage of a bill through Congress.” — Craufurd D. Goodwin, “Walter Lippmann: Public Economist” (Harvard University Press, 2014), pp. 2-3.

Gross Output (GO) Growth Outpaces GDP Again to Suggest Robust Recovery

March 25, 2021 By Ned Piplovic 1 Comment

Washington, DC (Thursday, March 25, 2021): On March 25, 2021, the federal Bureau of Economic Analysis (BEA) released data for the fourth quarter 2020 gross output (GO) – the most comprehensive measure of total spending in the economy, including the supply chain. The data revealed that GO advanced significantly faster than GDP in the last period of 2020, a good sign that strong economic growth will continue into 2021. While fourth-quarter GDP expanded 6.1% in nominal terms, GO surged 10.6% in comparable terms. Similarly, GO growth of 6.6% in real terms exceeded the real-term GDP growth of 4.3%. Furthermore, on an annualized basis, fourth-quarter GO and GDP exceeded their values from before the 2020 pullback and have risen near their respective highest levels ever – lagging slightly only behind Q3 2019 results in nominal terms. After a minor dip in the first quarter 2020 and the sharp decline in the second quarter, the economy rallied back in the third quarter to recover most of the second-quarter losses. That growth trend continued in the fourth quarter 2020 at growth rates that exceed recent averages by a significant margin. Many economists feared that the sharp economic decline in the second quarter would have negative effects on long-term economic growth. To the extent that major sectors of the economy are still struggling (entertainment, sports, cruise ships, etc.), the US economy is still underperforming and is in many ways, a “K”-shaped recovery rather than a “V”-shaped recovery. The report released today is based on fourth-quarter 2020 data, when we still did not have complete information on the implementation of Operation Warp Speed – whether vaccines will be effective or how soon we would have enough doses to vaccinate the population to the point of herd immunity. However, with more than one-third of the adult population already vaccinated, easing of government business restrictions and more states going back to business as usual will provide further support necessary to maintain the current economic growth trend. A positive outlook can also be seen in the relationship between the GO and GDP decline during 2020. Earlier stages of production are generally more sensitive and more volatile in their response to economic disruptions. Therefore, during past recessions, GO commonly declined significantly more than GDP, which captures only final outputs in the economy. For instance, GO declined more than 26% during the last quarter 2008. In the same period, GDP pulled back less than 8%. But the 2020 economic slowdown broke from this pattern and saw GO decline at similar rates as the GDP. This anomaly from the established historical pattern, provides another indication that the underlying business fundamentals are significantly stronger than originally anticipated, that government shutdowns in response to the COVID-19 epidemic might have been unnecessary and that those responses might have even amplified the initial economic contraction in the second-quarter 2020. More importantly, as it did during the third quarter, business spending continued to outpace consumer spending in the last quarter 2020.

Business – Not Consumers – Drives the Economy

Contrary to views of many academic economists and wide-spread media reports, consumer spending does not drive the economy, and does not represent two-thirds of the economy. Using GO as a better and a more accurate measure of total spending in the economy, the business sector (B2B spending) is almost twice the size of consumer spending. Consumer spending is the effect, not the cause, of prosperity (Say’s law). Therefore, our business-to-business (B2B) index is very useful for gauging the economy’s underlying health and the readiness to rebound after economic downturns. The B2B Index measures all the business spending in the supply chain and new private capital investment. In the fourth quarter, nominal B2B activity expanded more than 14% to $26.6 trillion. At the same time, consumer spending grew less than 4% on an annualized basis to $14.5 trillion. In real terms, B2B activity expanded at an annualized rate of 12% to $23.25 trillion and consumer spending remained flat at the same level as in the previous period of $13 trillion.

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain,” stated Skousen. “After declining 5.4% and 44% in the first and second quarters, respectively, business activity expanded at an annualized rate of 39% and 12% in real terms in last two quarters of last year.”

GO Continues to Grow Faster than GDP in Fourth Quarter to Suggest Strong Economic Recovery at least in the First Half of 2021

Despite significant declines in the first two quarters of 2020, Gross Output indicates robust long-term growth. Prior to what appears to be merely a short-term pullback, GO delivered steady quarterly growth over the previous 42 consecutive periods. Gross Output growth slowed in late 2019, which could have been an early sign of economic slowdown even before the pandemic and government shutdowns in early 2020. However, GO’s renewed growth in the third and fourth quarter 2020 could set the tone for the overall direction of the economy for the entire 2021 and beyond. Gross Output is a leading indicator of what GDP will do in the next quarter and beyond. As David Ranson, chief economist for the private forecasting firm HCWE & Co., states, “Movements in gross output serve as a leading indicator of movements in GDP.” The federal government will release the advance estimate for first-quarter 2021 GDP on April 29, 2021 and the full release of Gross Output, as well as the third estimate of GDP on June 24, 2021. Important Note: We are hopeful that in the near future, the BEA will release GO at the same time as the first estimate of GDP for the quarter, not the third estimate.