by Timothy Nash, Bob Thomas, George Lang, and Tom Rastin In the book When We Are Free, an anthology published by Northwood University Press with a foreword by Milton Friedman, economic historian Dr. Lawrence W. Reed contributed a chapter titled The Fall of Rome and Modern Parallels.Reed examines how the Roman Empire collapsed and draws striking comparisons to the fiscal habits of modern governments. His warning is worth revisiting today. In the United States, federal law does not allow states to declare bankruptcy. To prevent fiscal collapse, 49 out of 50 states operate under some form of balanced budget requirement. These rules force policymakers to make difficult decisions each year and prevent deficits from spiraling out of control. The federal government operates very differently. Today the U.S. national debt now totals $38.9 trillion, about 125% of GDP, while state and local debt is $3.3 trillion, under 11% of GDP. In 1900, total U.S. debt was just 7.8% of GDP, mostly held by states and local governments. Even in 1981, federal debt was roughly 36% of GDP and barely exceeded $1 trillion. In other words, the federal government has moved from a relatively small borrower to the dominant source of public debt…
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