The Breaking Point

by James Dale Davidson

  For one thing, FATCA applies to all foreign financial institutions everywhere on the globe. No valid legal theory has been advanced for applying US law in other jurisdictions. Also note, not a single provision of FATCA targets actual tax evasion activity. You might be tempted to suppose that this policy is targeted to ensnare ultrawealthy Americans who selfishly calculate that the costs they pay for the US government far exceed what it is worth. Not so.

  By the way, I hasten to say that I am not one who makes the immense concession that people forfeit their rights by becoming successful. If FATCA were aimed only at billionaires or centimillionaires, it would still be a gross violation of human rights, as lucidly envisioned by Thomas Jefferson in the time when he was building up the courage to draft the Declaration of Independence. But FATCA is not aimed at billionaires. The government already knows who they are.

  It is aimed at you.

  You have heard demagogues in Congress fulminate about the rare instances where billionaires have renounced US citizenship and gained tremendous tax savings as a result. This was the case when Eduardo Saverin, a Brazilian-born entrepreneur immortalized in the movie The Social Network, renounced his US citizenship after having moved to Singapore. (Many billionaires are only too keen to stay in the United States because that is the best way of conserving crony capitalist privileges—subsidies, contracts, and regulations—procured through investments in politics. Politicians don’t want billionaires to flee the country because they would lose their best customers.)

  Mr. Saverin, who cofounded Facebook, was never involved politically, beyond inspiring the rage of Democratic Senators Chuck Schumer and Bob Casey. Their apoplexy over Mr. Saverin’s timely escape approached the intensity of the late East German president Walter Ulbricht’s denunciations of “the moral backwardness and depravity” of unpatriotic East German emigrants who found their way over and around Ulbricht’s “Anti-Fascist Protection Rampart,” a.k.a. the Berlin Wall.3

  Of course, Ulbricht was hardly renowned as a lucid economic analyst. In fact, the head of Stalin’s secret police, Lavrentiy Beria, once described Ulbricht as “the greatest idiot that he had ever seen.”4 Beria never knew Senators Schumer and Casey.

  Given that it is impractical for a bankrupt country to build an actual Berlin Wall, which would have to be 19,577 miles long to physically seal off US borders, Schumer and Casey want to create a virtual wall that makes it practically impossible for anyone to escape their clutches.

  To that end, they announced a new bill called the Ex-PATRIOT Act, which would reimpose taxes on expatriates, like Saverin, even after they left the United States and began residing in another country. As Forbes reported in May 2012, the bill would presume that individuals with a net worth more than $2 million, or an average income tax liability of at least $148,000 over the last five years, are attempting to avoid taxes by renouncing their citizenship. These people would have to prove to the IRS that this was not the case or they would risk additional capital gains tax on future investment gains. That shows you what they think of the bargain they have created for US subjects.

  The arrogance of these guys knows no bounds. They not only betray the principles of human rights so clearly articulated by Thomas Jefferson, frequently hailed as the founder of the Democratic Party, but they are apparently intent on repeating a policy that history shows has never worked. It didn’t work for East Germany. It didn’t work for the Roman Empire. It won’t work for America, either.

  It isn’t enough that a man like Eduardo Saverin pays the US government hundreds of millions of dollars in taxes for which he receives literally nothing in exchange. The politicians know that no one in his right mind would shell out hundreds of millions of dollars for the pleasure of supporting their handiwork. That is why they favor an East German–style lockdown to make you the vassal of their superstate.

  “Is My Flight to Be Stopped?”

  FATCA, exit taxes, postexit taxes, and restrictions on expatriation are modern-day analogs to the tax reforms of Diocletian, the Roman emperor who ruled from AD 284 to AD 305. These reflected the unhappy fact that the Roman Empire had essentially declared bankruptcy and placed the burden of its inability to pay its debts on its citizens. Strangely, the Roman state grew even bigger and commanded larger military forces after it essentially went broke. The Empire imposed heavier taxes while conscripting citizens’ labor and regulating their lives and occupations. This state’s goal—beyond all else—was the survival of the state, and its leaders were willing to subdue individual interests and levy the empire’s resources to this end.

  While prosperity ebbed, and the people suffered, Diocletian escalated state spending tremendously. He increased the size of the army by as much as 50 percent, from 400,000 men when he took office to between 500,000 and 600,000. Diocletian also greatly expanded the bureaucracy, doubling it during his two decades in office. It merits mention that a contributing factor to the economic decline of the empire was natural cyclical cooling of the climate, which significantly reduced temperatures. Palaeoclimatic evidence reveals that average summer temperatures during the peak of the Roman Warm Period during the first century AD were on average 0.60 °C (1.08 °F) warmer relative to the current period (1951–1980 mean).5 Warmer weather made for greater agricultural prosperity. The Roman economy was based 80 percent on farming, so warmer weather and the bumper crops it produced made it easier for Romans to pay high tax levies. But after the middle of the first century, the climate began to cool gradually, and agricultural production accordingly fell. This put farmers under great stress because they were taxed according to the productivity of their land during the earlier warm period. In many cases, the annual tax due exceeded the full value of the crop as yields fell by the end of the third century (the reign of Diocletian). Faced with ruinous taxes they could not pay, many small farmers sought to abandon their fields and run away. This prompted Diocletian to push the peasantry on the way toward feudalism by fastening people to their jobs. The Cambridge Ancient History, volume 12, first edition, explains:

  When things had gone so far, it was impossible to turn back; all that remained was to follow the road to the end. This meant guarding against a general flight, announcing compulsory labor, and binding all classes—or at least all who did not belong to a privileged caste—to their professions, the peasant farmer to his land and forced labor, the state employed worker to his workshop, the trader, including the navicularius, to his business or his Corporation, the small property-owner to his duties in connection with liturgies, a large property-owner to the curia, the soldier to his military service, and so on.6

  Farmers, in particular, were prohibited from changing careers when confiscatory taxes made it ruinously unprofitable to stay in business. Those who tried to escape faced enslavement, even execution. Again, as reported in The Cambridge Ancient History:

  The full rigor of the law was let loose on the population. Soldiers acted as bailiffs or wandered as secret police through the land. Those who suffered most were, of course, the propertied class. . . . In connection with all this, compulsion and state-socialist regulation had established themselves more firmly. . . . Arrest, confiscation, and execution hung over their heads like a sword of Damocles . . . If the propertied classes buried their money, or sacrificed two-thirds of their estate to escape from a magistracy, or went so far as to give up their whole property in order to get free of the domains rent, and the non-propertied class ran away, the state replied by increasing the pressure. . . . In the petitions to the Emperor the threat of flight is the “ultimate refugium” and among the common questions which used to be put to an Oracle in Egypt three standard types were: “Am I to become a beggar?”7

  As explained in The Cambridge Ancient History, volume 12, once the empire had gotten to a certain point, it became impossible to turn back. The state leaders felt a need to lock down a potentially fleeing population, and they therefore created a system of forced labor, binding people to their professions by law. Apart from members of the
privileged castes, the peasant farmers were forced to stick to land and labor, the soldiers to the military, the traders to their businesses, and so on.8

  Farmers, in particular, were prohibited from changing careers when confiscatory taxes made it ruinously unprofitable to stay in business. Those who tried to escape faced enslavement, even execution. Soldiers patrolled the land as bailiffs and secret police. Those who suffered most were the propertied class, with arrest, confiscation, and execution hanging over their heads. As the nonpropertied class ran away, the state responded with increased pressure. Fears of destitution caused many more to flee, and three common questions could be heard throughout the land: “Am I to become a beggar?” “Shall I take to flight?” and “Is my flight to be stopped?”

  As was the case with ancient Rome, and more recently with East Germany, the danger to the state intent upon squeezing the population to the last drop does not turn on the escape of a single tycoon. Yes, Obama and his commissariat, including Senators Schumer and Casey, want to limit the freedom of thirty-year-old billionaires like Eduardo Saverin, but it isn’t just billionaires they are after. They want every thirty-year-old man to be a slave to Obamacare.

  What has them scared is mounting evidence that Americans today are at least as smart as East Germans were half a century ago. Ulbricht built the Berlin Wall after 3.5 million East Germans had escaped. Obama started erecting his virtual Berlin Wall to imprison you with FATCA at the first hint that large numbers of productive Americans were fleeing the country.

  You see, it is the millions of productive middle-class Americans who have recently escaped the United States, or are edging toward the exits, that have the government most worried. While the news has been full of reports for years about illegal immigration into the United States, the news media have been largely silent about the growing exodus from the United States.

  In the first decade of the twenty-first century, annual in-migration into the United States from Mexico, both legal and illegal, fell by more than 80 percent. And recent data show that the number of Mexican migrants and their families returning to Mexico outnumbered those coming north into the United States.

  The many other Americans who have chosen to leave include legions of Anglo retirees decamping to a country where their nest eggs go further. As reported in the July/August 2013 Chartist article, “Why So Many Americans Are Leaving the US in 1 Big Chart,” seniors in the fortieth income percentile in the United States would be in the ninetieth income percentile in Mexico.9

  The Association of Americans Resident Overseas suggests that there was a surge of persons leaving the United States after the onset of the Great Recession. This was implicitly confirmed by a State Department calculation that surfaced at about the time FATCA legislation was enacted. It concluded that some 1.34 million Americans had gone abroad and “fallen off the radar.”10 As one report put it, if Americans living abroad stopped paying their taxes, visiting the United States, and using embassy or counselor services, they would no longer be officially counted.

  The “Great Escape”

  Polling data show a startling surge in the number of Americans, especially younger Americans (aged twenty-five to thirty-four), who are planning to leave the United States. A 2011 survey conducted by Zogby found that an astonishing six million young Americans either had left the United States or were already packing their bags and planning to do so. Contrary to the myth that only billionaires could appreciate the logic of expatriating, the survey found that the largest percentage of those considering leaving was making $50,000 per year or less.

  Is this really a surprise? Median American income earners do not need to read the fine print in the New York Times to realize that life in the United States has become a dead end for people like them. If they did read it, they would have seen in a fall 2012 article, “The Uncomfortable Truth about American Wages,” that since 1970, the real earnings of the median male have declined by 19 percent—the median man in 2010 earned as much as the median man did in 1964. From 1970 to 2010, earnings for the median man with a high school diploma and no further schooling fell by 41 percent.11

  Such is the pedigree of Obama’s proletariat.

  It is little wonder that millions of young American men are looking for opportunities elsewhere. The good news is that many have found success outside the United States. That is what Obama wants to stop.

  Coley Hudgins wrote in “The Great American Migration,” of his firsthand observations in Latin America that a steady influx of younger Americans were setting up shop, starting families, and having children. They weren’t working for international businesses, nor were they even obtaining work visas. Instead, they were creating new jobs to fill niches lacking in their host countries or acting as consultants (who can work from anywhere with an Internet connection). Hudgins went on to point out that many foreign governments, recognizing the potential of this knowledge transfer, are now responding by easing immigration and residency policies for entrepreneurs and job creators. “What all of this demonstrates,” Hudgins wrote, “is that even in bad times Americans’ unquenchable appetite for risk, opportunity and economic freedom is the same as it’s always been.”12

  Bob Adams, who has written about “The Great Escape” for Barrons, says that nearly 40 percent of young Americans (aged eighteen to twenty-four) are thinking about leaving the United States to seek opportunity abroad. An incredible 5.1 percent of Americans aged twenty-five to thirty-four are in the planning stages for relocation, including 3.1 percent of all American men. This represents more than a fivefold increase from 2009. Note also that 26.2 percent of Americans aged twenty-five to thirty-four are not working.13 The New York Times put this in perspective in May 2013, stating that the United States’ percentage of young adults without jobs had surpassed much of Europe’s. Furthermore, among large, wealthy economies, between 2001 and 2013, the United States went from having the highest share of employed twenty-five- to thirty-four-year-olds to having among the lowest.14

  As detailed by the Population Reference Bureau, by 2011, 5.9 million young adults in the United States had moved back home with their parents, including 18.6 percent of American men aged twenty-five to thirty-four.15

  These are the people whom Obama wishes to lock down. He needs them to stay in the United States to subscribe to Obamacare. The fact that young men are more likely to depart than young women is particularly subversive of Obamacare. Obama needs all the men he can force under his thumb. They are crucial to the success of Obamacare. He needs them to buy expensive insurance cover for maternity care. Sounds like a joke, but it is true.

  Contrary to the bland presumption that young people are enthusiastic partisans of Obama’s corporatist Affordable Care Act, a survey conducted by Harvard University’s Institute of Politics showed that 57 percent of young people between the ages of eighteen and twenty-nine disapprove of Obamacare, and large pluralities believe it will increase costs and worsen health care in the United States.16 They are right.

  It is notable that among the more popular destinations for American expatriates, Costa Rica enjoys higher life expectancy than the United States for both men and women. Yet per capita medical outlays in Costa Rica are just $1,197 annually. Even before Obamacare, US health care costs were $8,233 per capita—almost seven times higher than in Costa Rica, where private health insurance runs from $60 to $130 per month. (According to the IRS, it will cost a family of four a minimum of $20,000 a year for health insurance—$1,667 per month—not to mention the additional costs imposed by a minimum of twenty new taxes imposed by Obamacare.)17

  I should mention that Costa Rica’s distinction in enjoying a higher life expectancy than the United States is nothing special. I used the example of Costa Rica because as a resident of South Florida I am importuned with radio advertisements urging me to become a medical tourist in Costa Rica. Despite the fact that the United States spends incomparably more than anyone else on sick care, the United States ranks forty-third in the CIA’s table of world life
expectancy.18

  Fifty years ago, the United States enjoyed the world’s highest life expectancy by far. That was then. In the meantime, the triumph of corporatism left the United States with a health care system dedicated to the interests of insurance companies and the purveyors of pharmaceutical and medical devices rather than patients.

  Note that the health care situation in the United States exquisitely illustrates what is meant by the phrase “fat, dumb, and happy.” Fat, we are. According to a calculation published in Forbes in 2007, 74.1 percent of American adults are medically overweight or obese.19 A 2012 report from the Trust for America’s Health and the Robert Wood Johnson Foundation projected that unless Americans change their habits, half of US adults will be obese by 2030.20 Considering that we are content to let ourselves be fleeced by one of the world’s most expensive health care systems, we seem to be happy not being very smart.

  It is perhaps no coincidence that apart from Japan, all of the areas with the very highest life expectancies—greater than eighty-two years—are city-states or minijurisdictions. Top of the list is the Principality of Monaco, with a composite life expectancy of 89.68 years. Also at the top of the table are Macau, Singapore, San Marino, Andorra, Guernsey, and Hong Kong. I see the fact that city-states are leading the world in both prosperity and life expectancy as a strong hint that when the US imperium finally comes to an end, the world system is destined to be reconfigured with city-states playing a leading role.

  Meanwhile, an important new facet of the Costa Rican economy is medical tourism. Patients from the United States fly to Costa Rica for expensive dental procedures, such as implants. They also come for a whole range of surgical procedures in private Costa Rican hospitals. These are performed at an average of 70 percent cost savings as compared to the United States.