Here’s why we are cruisin’ for an economic bruisin’ and sowing the seeds for some bad times ahead

Here's why we are cruisin' for an economic bruisin' and sowing the seeds for some bad times ahead


W. Sherman Rogers (3-2-20)

Note: I posted this blog when President Trump was still referring to the coronavirus epidemic as a “hoax” and before markets began to tumble dramatically. I mentioned the coronavirus epidemic as a possible trigger for an economic downturn near the end of the post.

The U.S. cannot forever fund the government it has chosen given:

  1. the tax code it currently has (especially the tax code it has had as of 2017);
  2. the domestic promises it has made (e.g., Social Security, Medicare, etc); and
  3. the defense it needs.

The brief discussion that follows is not an endorsement for or against any political party. Indeed, you won’t hear any political party speaking about what I’m about to discuss; at least until economic disaster strikes or appears to be imminent. So let’s get started with some facts.  See George F. Will, A Plan to Treat Wealth Like Wages, Washington Post, February 21, 2020, A21.

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Background Information For the Movie LINCOLN


Here are a few paragraphs of historical background information you may wish to read if you decide to see Steven Spielberg’s recently released movie titled LINCOLN.

Does the movie live up to its billing as a masterpiece? My answer is probably yes.

I’ve given at least twenty-five speeches over the past two years that touch on various aspects of the movie. Most—but not all—of the content of these speeches that are relevant to the movie derive from various passages of my book titled The African American Entrepreneur Then and Now at pages 35-39 (The South’s Preoccupation With Maintaining Slavery) and at 43-51 (The Reconstruction Era—1867-1877).

Accordingly, with that having been said, here are some background facts and information that you might find helpful before you view the film.

On September 22, 1862, President Lincoln announced that he would issue a formal emancipation of all slaves in any confederate state that did not return to Union control by January 1, 1863. Therefore, Lincoln did not intend the prospective proclamation to cover the nearly 500,000 slaves in slave-holding Border States which did not join the confederacy such as Missouri, Kentucky, Maryland or Delaware.

On January 1, 1863, President Lincoln, exercising his war powers, proclaimed the freedom of 3.1 million of the nation’s 4 million slaves and immediately freed 50,000 of them. It was not until June 18 and June 19 that the federal government was able to enforce (via General Gordon Granger in Galveston, Texas) the emancipation of the slaves in Texas. That day has henceforth been known as Juneteenth. Total abolition of slavery was not accomplished until the ratification of the 13th Amendment in December 1865.

The massive resistance of the holdout state of Texas to the emancipation proclamation until literally forced to do so after federal occupation and enforcement on June 18 and 19, 1865—over two years after its issuance—speaks to the fierce resistance that black people have had to overcome just to achieve the basic liberty to bodily freedom. That’s why 39 States and the District of Columbia celebrate a holiday known as Juneteenth. But old attitudes die hard. And that is precisely the reason why it took the Thirteenth Amendment to the Constitution ratified in December 1865 to secure this basic liberty.

Here’s the background leading up to the 13th Amendment. The Senate passed legislation proposing the 13th Amendment on April 8, 1864 followed by action by the House on January 31, 1865 (a very difficult task). On December 18, 1865, Secretary of State William H. Seward proclaimed it to have been adopted. It was the first of the three Reconstruction Amendments adopted after the American Civil War.

An assassin killed Abraham Lincoln and he died on April 15, 1865 at 7:22am.

There were somewhere between 212, 938 to 214, 938 combat deaths in the Civil War although the total number of overall deaths were approximately 625,000. World War II witnessed more American combat deaths (291,557). See Attachment on US Casualties of War. See my book, The African American Entrepreneur Then and Now at 35-39, (The South’s Preoccupation in Maintaining Slavery).

The Dred Scott v. Sandford case decided in 1857 said that black persons of African descent who had been reduced to bondage were considered to be chattel property and something less than human beings. It took two constitutional amendments—the thirteenth and fourteenth—to elevate black people to fully human (as opposed to chattel status) and to make black people born in the United States capable of becoming citizens of the United States.

The Declaration of Independence’s statement in 1776 of universal equality, for example, did not apply to blacks. Under the U.S. Constitution ratified in 1787, blacks counted as “three-fifths of all other persons for political representation purposes.” The Constitution also prevented Congress from prohibiting the slave trade until 1808 and sought to ensure that “escaping” slaves would be returned to their owners.[i] Interestingly, the Constitution never uses the words slave, black, African, or any other racial labels.

In Prigg v. Pennsylvania,[ii] the Supreme Court made it clear that any state effort to prevent individuals from capturing and returning slaves to their owners was preempted by the Fugitive Slave Act of 1793.[iii] See my book, The African American Entrepreneur Then and Now at 35-39, (The South’s Preoccupation in Maintaining Slavery).

“Americans should know…that Wall Street’s rise as a financial center was largely fueled by the cotton trade, which could not have functioned without slavery. When the Civil War began, the mayor of New York, Fernando Wood, tried to find a way for the city to remain neutral so that it could continue its lucrative business dealings with the South.”

As Thurgood Marshall noted in an important speech during the bicentennial of the United States Constitution in 1987, the Founding Fathers’ foresight and sense of justice was troubling and not particularly profound. He noted, among other things, that economic interests of the Northern and Southern states were behind the compromise of the Southern states to continue importing slaves to the United States until 1808. See my book, The African American Entrepreneur Then and Now at 27-28.

Congressman Thaddeus Stevens—of radical republican fame—is a person with whom you should definitely become familiar prior to viewing the film. I mention Stevens in my book at pages 43 and 50 (Chapter 3, The Reconstruction Era—1867-1877). Congressman Stevens is one of the more important characters in Spielberg’s movie. See also the attached Wikipedia Information on Thaddeus Stevens.

You might also want to check out the attached information about Massachusetts Senator Charles Sumner. I don’t specifically mention Sumner in my book although I wished I had the time and space to discuss him. The film refers to him several times.

[i] The African American Almanac (Farmington Hills, MI: Gale Research Inc., 1997), 411–412, and United States Constitution, art. I. art.§ 2 cl.3, I. § 9, cl. 1, and United States Constitution, art. IV. § 2.

[ii]41 U.S. 539 (1842).

[iii] The African American Almanac (Farmington Hills, MI: Gale Research Inc., 1997), 412.

How D.C. Became Slave Capital of US in 1st Fed Debt Deal Compromise


The first federal “deal” (i.e., a compromise) with respect to the federal debt resulted in Washington, D.C. becoming the “slave” capital of the United States. More about that in just one second.

Now that President Obama has been re-elected, you have to wonder what compromises will be made to avoid the fiscal cliff before year-end. This is when automatic spending cuts—also known as sequestration—kick in and the lower tax rates of the past decade expire.

I thought I would share this interesting historical story with you as lots of people have never heard it before. It’s all included in my upcoming book titled Winners and Losers in the American Capitalistic Economy: A Primer.

Additionally, if you don’t the know the difference between  a Budget Deficit,  the Gross Federal Debt, the Publicly Held Debt,  the Net Federal Debt , and the General Government Debt, I try to give you a little help.  How many people actually know what all these terms mean? Seems like almost no one. That’s why I’m writing the book.


In 1790, about 20 percent of Americans were considered property. Though some Southern leaders felt uneasy about the institution — Jefferson, a slave-owner, fretted about its “unhappy influence” — few could imagine the South without slaves.

President Obama and congressional Republicans are still struggling to strike a deal on the debt ceiling that would keep the nation from default. It is difficult to foresee what final compromise they might reach — but it’s hard to imagine one more consequential than the bargain struck more than 200 years ago that ended another debt crisis while laying the foundation for our economic system. That fateful deal also ensured that Washington became a slave capital. [See Chris Myers Asch, The Grand Bargain on Debt that Made D.C. a Slave Capital Wash Post, July 21, 2012]

In 1790, the federal government and the states were nearly $80 million in the red, burdened by annual interest payments that were triple the nation’s income. A decade after the financially strapped United States madly raised funds for the Revolutionary War, the country was facing default. If the new nation failed to pay its debts, Treasury Secretary Alexander Hamilton feared, it would be shut out of world markets. Foreign governments and individual investors, worried that their loans would never be paid back, might refuse to invest in America. The young economy would be crippled.

To avoid economic collapse, Hamilton proposed a series of financial reforms, including “assumption,” or having the federal government assume the states’ debts and commit to paying their full value. A national debt, he argued, was “the price of liberty” — a free nation was not free to walk away from its financial obligations. Many members of Congress, particularly Virginia’s James Madison and other Southerners, vociferously objected. Opponents saw assumption as a sign of the growing power of the federal government and rejected Hamilton’s insistence that the Constitution’s “necessary and proper” clause allowed fiscal measures of such huge scope.

The issue produced what Secretary of State Thomas Jefferson called “the most bitter & angry contests ever known in Congress.” Opponents of assumption threatened secession, and they had enough votes to block the measure. Hamilton, a New Yorker, knew that Jefferson had substantial credibility with Madison and the Southerners, and he pleaded for help. Jefferson agreed to intervene, hatching a compromise that also addressed the other major political stalemate that bedeviled Congress that spring: where to put the nation’s capital.

The Constitution authorized Congress to create a federal district to serve as the national seat of government but did not specify its location. The city awarded this prize would enjoy prestige, power and economic growth. If built in the South, the capital would also be more likely to protect the bedrock of the Southern economy: slavery.

In 1790, about 20 percent of Americans were considered property. Though some Southern leaders felt uneasy about the institution — Jefferson, a slave-owner, fretted about its “unhappy influence” — few could imagine the South without slaves. As an international abolitionist movement gained steam in the late 18th century, many Southerners felt under siege and believed that a Southern capital would protect their interests. But they did not have the votes to put the capital in the South, while Hamilton, a founding member of the New-York Society for Promoting the Manumission of Slaves, did not have the votes to get his assumption plan through Congress.

Jefferson, hardly a disinterested observer, stepped in to broker a compromise. Over dinner at his rented Manhattan home in mid-June — historian Joseph Ellis called it “the most meaningful dinner party in American history” — Jefferson brought Hamilton and Madison together to hammer out an agreement. Madison agreed to lean on Southern representatives to support the assumption bill. In exchange, Hamilton would persuade his Northern allies to support a capital on the banks of the Potomac.

It was a deal with tremendous long-term consequences for the nation and for the future capital. The compromise secured America’s financial future as well as the constitutional doctrine of implied powers, strengthening the federal government at a critical time.

But the deal sealed the new city’s fate as a slave capital. Safely ensconced between two of the country’s largest slave states, Washington became a glaring contradiction — a citadel of freedom that nonetheless protected slavery and prospered from the burgeoning domestic slave trade. Thanks to the port of Alexandria, which remained part of the District until 1846, D.C. became the largest slave-trading city in the nation. Slaves here were an everyday part of life. They helped build the city, they lived in the White House, and they were sold on auction blocks downtown.

Fighting a war to preserve the Union from a slavery-friendly capital, President Abraham Lincoln tread cautiously lest he frighten Maryland into the arms of the Confederacy, resisting calls for D.C. emancipation until 1862 and allowing compensation to be paid to Washington slave-owners. For almost a century after the Civil War, D.C. remained distinctly Southern, with separate schools, neighborhoods and jobs for its black citizens. The city’s white leadership repeatedly rebuffed attempts to create an interracial democracy. Instead of representative self-government, D.C. was ruled by three invariably white commissioners appointed by the president, an arrangement that one commissioner in 1901 called “an ideal form of government because it is a government by the best citizens.”

Today, with the District losing its black majority, battles over gentrification, voting rights, school reform and even bike lanes show that racial tension remains embedded in Washington life. The grand bargain struck over Jefferson’s dinner table in 1790 came with a tremendous price.


Economists and members of the financial community often use terms without defining them. This is because they are largely talking to each other and not members of the general public. Accordingly, let’s get some working definition of terms used when discussing the Federal Debt, The Deficit, and the Federal Budget.  See Table Below.

Budget  Deficit

 A budget deficit occurs when the federal government’s spending is greater than its tax revenue. The government is paying out more than it’s taking in. How does the government make up the difference? It borrows (i.e., it goes into debt). I’ll explain how and from whom the government borrows in just a few minutes.

Gross Federal Debt

This is the total amount of money owed by the United States to every source whether foreign or domestic.  In 2009, this figure was $11.9 trillion and constituted 83 percent of the nation’s gross domestic product (GDP).

Gross Domestic Product is the nation’s expenditures on all goods and services produced during  the year at market prices. The idea is that one person’s expenditure constitutes income to another person. Not too difficult to understand as a general proposition. When I spend money, I’m providing income to someone else. The devil is in the details. However, for purposes of this limited discussion, I won’t go into all of those details.

The  four engines of the economy which make up GDP

  1.  consumer spending and housing (66% to 76% of  GDP in the U.S.) [Greg Ip at 34-36],
  2. business and investment in capital which includes money spent by firms for items such as buildings, equipment, and inventories (8% to 13% of GDP in the U.S.) [Greg Ip at 34, 36-37],
  3. government spending (18% to 20% of GDP in the U.S.) [Greg Ip at 34, 37], and
  4. exports (8% to 12% of GDP) [Greg Ip at 34, 37].

Publicly Held Debt

This is the total amount of money owed by the United States minus debt owed to other parts of the government such as the Social Security Trust Fund. In 2009, this figure was $7.5 trillion and constituted 53 percent of GDP.

Net Federal Debt

This is the publicly held debt owed by the United States minus debt payments owed to the Federal Reserve.  In 2009, this figure was $6.8 trillion and constituted 48 percent of GDP.

General Government Debt

This is the net federal debt plus state and local debt less receivables. In 2009, this figure was $9.1 trillion and constituted 64 percent of GDP.

How Big is the National Debt?



  (As of September 20009)                                               $ trillion Share of GDP

Gross federal debt                                                                         11.9                      83%
debt owed to other parts of the                                   4.6
government (e.g. , Social Security Trust Fund)
publicly held debt                                                              7.5                      53%
debt held by the Federal Reserve                                 0.8
Equals net federal debt                                                                6.8                      48%
state and local debt (excluding receivables)                 2.4
Equals general government debt                                               9.1                      64%
Federal government financial assets                                        0.9

 Source: U.S. Treasury, Office of Management and Budget, Federal Reserve.


This is an attempt to explain, as simply as possible, some of the likely consequences to everyone if the United States government should default on money it owes to its creditors for money that it has borrowed from them. The United States currently owes its creditors $14 trillion.


The U.S. must borrow money because it does not have enough income (revenues) to pay for  all of the things it is legally obligated to pay to a variety of persons and entities. Therefore, in the event of a default, someone who looks to the government for a salary or some other monetary benefit won't get paid. Take your pick, do you choose not to pay members of our armed forces, social security recipients, federal government employees? Well, the list goes on and on.

The following are important points worth noting which were made in three articles which recently appeared in the Washington Post that are relevant to understanding the issues involved. I  have attached these materials to this email. I used these three pieces as source material for my brief discussion here. Let's get started.

1. To pay for its current expenses, the United States borrows money by issuing U.S. Treasury Securities (treasury bonds, treasury notes, treasury bills, and treasury issued savings bonds) to lenders. The U.S. promises to pay these lenders the face value of the particular treasury security at a stipulated maturity date and to pay a stipulated interest rate. As mentioned earlier, the U.S. must borrow money because it does not have enough income (revenues) to pay for all of the things it is legally obligated to pay to a variety of persons and entities.

2. The United States borrows money by issuing treasury securities such as treasury bonds to pay the U.S. government's current expenses (for which it has insufficient revenues from taxes to pay) from the following lending sources:


  •  federal trust funds ($5.7 trillion--e.g., the government sometimes borrows from federal  trust funds such as the Medicare Trust Fund or the Social Security Fund--i.e., this is debt that the government owes to itself);
  • foreign investors ($4.4 trillion--e.g., foreign countries, foreign individuals, and foreign corporations); and
  • domestic investors ($3.9 trillion--e.g., state and local governments, banks and insurance companies, mutual funds and savings bonds, pension funds, individuals, brokers, businesses, trusts and estates).

3. U.S. treasury bonds--the foundation of almost all other financial products--are at the base of the global financial pyramid. The world financial system uses the interest rates set by U.S. treasury securities to set the rate of "riskless return"--i.e., "the price of lending someone money and knowing, with perfect certainty, that they will pay you back with interest." The act of tying world interest rates to the rates set for U.S. treasury securities is referred to as "benchmarking". See Ezra Klein, In a Default, Consequences Would be Dire: A Fiscal Infection That Can Spread Everywhere, WASH POST, July 16, 2011.

4. The following are examples of how the world benchmarks its interest rates to the interest rates of U.S. treasuries (treasury bonds, notes, bills, and savings bonds):

  • Brazilian loans tie themselves to the interest rates of those set for American government treasuries. This shows the high esteem in which the world holds the safety of buying U.S. debt in the form of treasury securities.  See Ezra Klein, supra.
  • Another 7,000 debt products are "directly linked to the U.S. government or are otherwise vulnerable to sovereign risk" (i.e., the risk that U.S. may default on its obligations to pay principal and/or interest on treasuries it has issued). If America tumbles, so do these 7,000 debt products because these bonds rely directly on payments from the U.S. (e.g., certain types of municipal bonds).
  • If the federal government's borrowing costs rise (which will happen if the U.S. defaults on its obligation to pay principal and/or interest on the bonds it has issued to lenders), everyone else's interest rates will rise. Mortgage rates will jump, car loans will be harder to obtain, universities won't be able to float bonds, and cities won't be able to fund themselves because of the amount they will have to pay in increased interest charges.

5.  Two former Republican Senators, Howard Baker and Nancy Kassebaum Baker, wrote a timely article titled: We Must Avoid Default, Washington Post, July 18, 2011, at A15.

In that article, the two former senators noted that "The prospect of default on the sovereign credit of the United States of America is so frightening, significant, so sinister and so far-reaching in its impact that we can't fail to deal with this issue."

These two former senators state that, in their opinion, "the question is not really the debt limit but, rather, the fundamental commitment to honor our obligations" and "the need to maintain balance between the actions of the moment and the national welfare of the future."

They state that the ultimate solution will require a combination of reduced spending, enhanced revenue, and reform of our tax code and entitlement benefits--not default on our commitment to pay the obligations we have incurred.

Government spending cutbacks will be particularly devastating for persons who directly or indirectly rely on the government for employment and other benefits. It's an important subject all by itself and lies near the core of the current debate.

Professor Rogers Awarded Faculty Senate Award for Scholarship and Creativity


Dr. Alvin Thornton (Senior Advisor to HU President Ribeau), Sidney Ribeau (HU President), W. Sherman Rogers, Dr. Eric Walters (Chair of Faculty Senate), and James Wyche (HU Provost).

Professor Rogers was honored for writing The African American Entrepreneur Then and Now. Read more

W. Sherman Rogers Featured in Howard Magazine

W. Sherman Rogers (J.D. '76), professor at the Howard University School of Law, believes the key to economic success for African Americans is entrepreneurship, which equals independence. ''I've always believed that Black people should do more to rely upon their own efforts as opposed to expecting good things to happen and develop at the hands of other people," says Rogers. Read more