American Democracy: What Went Wrong and When?

February 24th, 2012
in Op Ed

by Frank Li

This is the sixth article of the series: “Towards An Ideal Form of Government”.

In my 2/10/2012 post (“What is America, Anyway?”), I stated:

“Simply put, America has already sacrificed too much capitalism for democracy! For details, wait for my article: ‘American democracy: what went wrong and when?’ in two weeks.”

lady-liberty-dispairHere is that article! I will examine American democracy from 1776 to today, in terms of what went wrong and when.

A note: Armchair generals can point out “what’s wrong” about anything, especially for a vast subject like America (e.g. Here’s What’s Wrong with America). I think I am uniquely qualified to do so, because I believe I have most accurately identified the root cause of many of America’s ills and proposed the best solution. In other words, nit picking is allowed only after you have offered a credible solution!

Follow up:

1. The U.S. Constitution

First and foremost, let me repeat: “our constitution, which remains largely unchanged for 200 years, is seriously out of date.” It’s time for us to substantially amend (not discard) it with three major changes as follows:

(1) Limiting the American Presidency to 1-term (e.g. six years).

(2) Raising the statutory requirements for the American Presidency, such as the minimum age to 55 (from 35) and only after having served a full-term as governor.

(3) Introducing strict term-limits for Congress, preferably 1-term (e.g. six years) as well.

Why these major changes?  In addition to my numerous writings on constitution3the subject, here is an excerpt from US Constitution Online:

Thomas Jefferson himself was wary of the power of the dead over the living in the form of an unchanging Constitution. To ensure that each generation have a say in the framework of the government, he proposed that the Constitution, and each one following it, expire after 19 or 20 years.”

So these changes are long overdue! For example, 200 years ago, the average life expectancy in America was less than 55. Today, it’s more than 75! Therefore, it’s demographically correct to change the minimum age of the American Presidency from 35 to 55! More on this later in Section 8!

2. America: 1776 - 1918

America thrived economically throughout this period, largely because of rugged individualism and unfettered capitalism. The government played a relatively insignificant role in the economy, especially when compared with today. For example, Thomas Edison invented the light bulb and electricity without help from the government.  Henry Ford invented the assembly lines in the same way.

Very importantly, throughout this period, all members of Congress served without pay, because they were successful (i.e. rich) people, and they truly served for the betterment of their country, with no monetary returns!

3. America: 1918 – 1945

The role of the government expanded substantially after 1918, when WWI ended. Two things went very wrong during this period:

(1) The start of career politicians: After WWI, members of Congress voted themselves stipends to cover the cost of living in Washington. Still no pay for any assistants – They could bring in as many as they wanted, as they were on their own. After WWII, they voted themselves full pay plus generous benefits (e.g. pensions), and added salaries for many assistants, thus paving the way for "career politicians." All hell broke loose after that! Since then, most of them have been there for one supreme purpose only: getting re-elected ad nauseum. It stopped being about us, or even about the U.S.; it became all about them! In other words, it is me first, my constituents next, and my country last. It is a cancer, killing America from within, slowly but surely …

depression-woman(2) Great Depression: It was bad. The government initiated many social programs to fight against it, but none of them really helped America get out of the Great Depression. The advent of WWII, not the massive government spending on the various social programs, finally pulled America out of the Great Depression. Both Presidents Hoover and Roosevelt acknowledged it as a fact. However, that has never dissuaded many left-wing extremists from stridently proclaiming the importance of excessive government spending, from the Great Depression to today’s Great Recession.

Now, let’s single out two issues that have profound implications to America today:

(1) Government programs: Three major government programs that were all well intentioned to begin with, but turned out to be problematic, at least, down the road:

a. Smoot-Hawley Tariff: It actually helped worsen the Great Depression. It badly hurt Europe, America’s chief trading partner at the time, which in turn hurt America, prolonging the Great Depression on both continents.

b. New Deal: This was the beginning of America as an entitlement society vs. unfettered capitalism based on rugged individualism.

c. Social Security: It is not an entitlement program per se, especially for those who have paid into it. Rather, it’s a Ponzi scheme predestined to fail! In fact, it is such a big Ponzi scheme that it makes Bernie Madoff look trivial!

(2) Keynesians: The Keynesian economic theory is basically sound. It has two elements: <A> the government saves in good times and <B> the government spends extra in bad times. Unfortunately, many left-wing extremists (e.g. Paul Krugman and Robert Reich) conveniently forget about <A> while actively advocating an extreme version of <B>, as extreme as “deficit spending is good for the economy” and is the only way to get out of today’s Great Recession. Total abuse of Keynes!

hands-outFor a comprehensive review of how the progressive movement flourished during this period of time, read: The Progressive Movement’s Discredited Legacy.

4. America: 1945 – 1989

This was the Cold War period, in which the West, led by the U.S., competed against the East, led primarily by the Soviet Union and seconded by China. By 1989, the West had won, unquestionably!

Throughout this period, the U.S. enjoyed prosperity unprecedented in human history. However, several time bombs were seeded which are now exploding! Three examples:

(1) Public-sector unions: Here is a good article about them: The New Tammany Hall. Above all, I believe the public sector unions are totally communistic and must therefore go! This one has done so much on-going damage to America that I don’t think history will be very kind to President Kennedy for first allowing them (via Executive Order 10988)!


(2) Medicare and Medicaid: We have been borrowing to pay for them since their inception! Like Social Security, it’s a Ponzi scheme! This one, as part of the Great Society, was perpetrated on us by President Johnson.

(3) Community Reinvestment Act (CRA): It was the key factor in the creation of the housing bubble that burst in 2008, with no easy way out, even today. The CRA was passed on President Carter’s watch.

All three Presidents mentioned above are/were Democrats! A coincidence? No! The Democratic Party has been the party of entitlements since FDR! Why? Because the beneficiaries of the entitlements form the bulk of that party! In short, it’s money for votes, even if it means to destroy America by emptying her public treasury!

The Republican Presidents during this period were much better, with Ronald Reagan standing out as the best American President after WWII!

5. America: 1990 – 2000

Throughout this decade, America thrived again, largely because of the groundwork laid by President Reagan in the 1980s, including the end of the Cold War in 1989. There were two big problems during this period that have become increasingly clear now:

(1) We failed to adjust adequately after the Cold War ended in 1989.

a. Our military was too big and we became a major source of instability around the world, especially in the Middle East. Yes, Ron Paul has got this one right! (Ron Paul on 9/11: Ask the right questions and face the truth.)

b. China embraced capitalism big time, and was on its way to becoming a formidable economic competitor with America.

(2) CRA: President Clinton, another Democrat, amended it to its final, and lethal, form, thus ensuring a spectacular housing bubble that burst in 2008.

6. America: 2001 – 2012

The bottom fell out! Here are two main reasons:

(1) The rise of China (and the Emerging Economies) has given America (and the West) the first real competition since WWII.

(2) The incompetence of the American political system finally showed up and years of excessive government spending have finally caught up with us.

As a result, we ended up with two worst Presidents in history:

(1) George W. Bush: for “turning off the beacon” to launch the Iraq War.

(2) Barack Obama: for being the biggest spender, by far, in U.S. history! Our national debt has skyrocketed from $9T in 2009 to $15T in 2012!

Let me repeatTogether the policies of these two Presidents have done more damage to America than all of America’s enemies have done, combined! The biggest threat to America is its faltering economy, which is plainly visible now!

Here is a quote:

America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.”

Who said it? Abraham Lincoln! Lincoln was right!


7. Discussion

Why is America so deeply in trouble today?  It’s the political system, stupid!


7.1 No competition, no problem

working-stiffFrom 1945 to 2000, it did not really matter very much who the American President was, because America’s economic system was so much better than the East and so much larger than its competitors within the West (e.g. Germany and Japan). In other words, America simply could do no wrong, including the push to sacrifice some capitalism for democracy, as a necessary expense to quell resentment of the prosperous. But not any longer! Democracy is now destroying capitalism, the engine of American success, in its inevitable march toward destructive socialism (read: Democracy and Communism: Are They Really The Same?)!


7.2 Competition

As we turned to the 21st century, China emerged as a true economic competitor for America for the first time since WWII. This competitor is different from the previous ones for two main reasons:

(1) Economically: Unlike America’s former competitors (e.g. Germany and Japan), China has both the size and weight to provide real competition for America.

(2) Politically: Unlike the East vs. the West before the Cold War ended in 1989, the Chinese political system today is, in my view, slightly better than the American political system.

Let me repeat: “America still has two huge advantages over China: abundance of natural resources and vastly more advanced capitalism. However, these two advantages may be inadequate to compensate for the inferiority of the American political system.”

One huge difference between America and China is the leaders at the top! Just compare the resumes: President Obama vs. President Hu china-american-flagsJintao and Xi Jinping (China’s VP and the next President). No comparison in substance! Barack Obama did not have any executive experience before becoming the American President, while the Chinese leaders all have great track records before taking the top jobs in China! It’s the political system, stupid! In a nutshell, the American President is elected via a popularity contest, while “the next leaders in China have been long prepared by the current leaders, in a way similar to the GE way”!


8. The solution

patriotic-ribbonConstitutional changes! It’s the only way for America to have any chance in its head-on competition with China!

Follow the proposal by Thomas Jefferson: “that the Constitution, and each one following it, expire after 19 or 20 years.”

Follow these specific suggestions:

(1)  Limiting the American Presidency to 1-term (e.g. six years).

(2) Raising the statutory requirements for the American Presidency, such as the minimum age to 55 and only after having served a full-term as governor.

  • America simply can no longer afford to have a President who is inadequately prepared for the top job in America!

(3) Introducing strict term-limits for Congress, preferably 1-term (e.g. six years) as well.

  • America simply can no longer afford to have Americans keep sending career politicians back to Congress as their “men or women,” who, as a whole in Congress, live with a disapproval rate at 87%!

Now, why are term-limits for Congress not law yet, despite the fact that people have been crying for them for decades ( Two main reasons:

term-limits-need(1) They are not in the Constitution. They were not needed 200 years ago, because all Congressional positions were unpaid.

(2) They are not in any amendments. They are unwanted by lawmakers, because most of them have been self-serving career politicians, since the end of WWII in 1945, at least.

Bottom line: How long can a country stay at the top when its top politicians, systematically and consistently, serve themselves first, their constituents next, and their country last?

For a more comprehensive understanding of the need of these constitutional changes, read my numerous writings.

9. Closing

America desperately needs a strong leader, a commanding presence, to clean up the mess in Washington and move towards an ideal form of government. My solution is the only workable proposal on the table!

Time is running out! Unless we can change our political system for the better soon, America will be finished. Here are three perspectives for you to more fully appreciate the danger we are in:

(1) The truth about Tytler.

(2) Globalization 2.0: Democracy’s Coming Demise.

(3) USA in 2012/2016: An Insolvent and Ungovernable Country.

Change the course or perish!



Related Articles

Previous articles by Frank Li


About the Author

Frank LiFrank Li is the Founder and President of W.E.I. (West-East International), a Chicago-based import & export company. Frank received his B.E. from Zhejiang University (China) in 1982, M.E. from the University of Tokyo in 1985, and Ph.D. from Vanderbilt University in 1988, all in Electrical Engineering. He worked for several companies until 2004, when he founded his own company W.E.I. Today, W.E.I. is a leader in the weighing industry not only in products & services, but also in thought and action.

Dr. Li writes extensively and uniquely on politics, for which he has been called "a modern-day Thomas Jefferson"(see page 31).


Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.


  1. Miles Hoffman Email says :

    You make some really valid points; however, when you say "The Keynesian economic theory is basically sound.", I think you fail to make an important distinction: Reality vs Theory.

    The gist of your article seems to be that the problem with capitalism is the political system. If this is so, how can you trust these politicians to "get Keynesian economics right"?

    Perhaps more importantly, you completely fail to mention "Creative Destruction". Much if not all of societal progress has come through innovations that spur great leaps in standards of living, such as "electricity and the lightbulb", which "destroyed" the candle/wax industry, and "the automobile/assembly line", which "destroyed" the horse and carriage industry.

    In the late 1970's, the bankruptcy laws were amended to include Chap 11, which really isn't bankruptcy, except, that is, to the debt holders. Corporations are no longer liquidated when they fail. Instead, their debts are wiped out and they are allowed to survive.

    Even if there was not some competitive "creation" that caused the company to go bankrupt, the change in the bankruptcy law prevents the "destruction" of inefficient companies (or companies created though "malinvestment"). This issue has only gotten worse with "too big to fail".

    Ultimately I think we are of like minds and essentially agree, although we frame the problem with capitalism differently. The way I see it, throughout history there have been periods of credit expansion ("booms") and credit contractions ("busts"). Prior to the Great Depression, the American political system simply did NOT interfere during booms or busts. The busts may have been painful, but they only lasted 12-18 months before "the malinvestment" was corrected.

    The Great Depression was the first time the government sought to lessen the impact of the bust, and in doing so, not only made the bust worse but they also prolonged it - lengthening it from 12-18 months to closer to 12-18 YEARS (1929-1945, 1969-1981, 2000-?).

    And given governments "excellent" record controlling the booms and busts (NOT), you rightly point out that a big part of our problem is governments further entry into the marketplace via Social Security, Medicare, Medicare,

    Simply put, the problem with our (capitalistic) economy is the arrogance of politicians who think they can control and/or improve it. And this problem is not unique to the USA...

    China is experiencing "their FIRST BOOM". Coming from "the economic dark ages", people see their progress from a "Third World" to an "emerging" country and they think the Chinese are going to take over the world. Let's not forget, they are still emerging and have a very long way to go to come close to the living standards we enjoy. And God help 'em, because capitalism and democracy go hand in hand, and China's boom will eventually go bust (these are LONG cycles generally based on demographics, and China's one child policy has created a horrible demographic). It will be fascinating to see which lasts longest: China's bust, or the US Treasury bills they will use to "pay for the bust".

  2. Frank Li (Member) Email says :


    Thanks for your long & thoughtful reply!

    > because capitalism and democracy go hand in hand

    No, they do not go hand in hand! Capitalism is great - proven!
    Democracy failed once already (Greece, ~1000 B.C., without capitalism then), and is failing again (America, 1964-today, with capitalism). So democracy is a proven failure, with or w/o capitalism!!!

  3. ECB-Watch says :

    GEI says:

    "Rebuttal articles are encouraged.  It is our site objective to provide objective, complete and impartial articles by publishing all accurate perspectives."

    So I'm going to go by that and say that this article is very shallow, but consistent in one way: simplistic recommendations supported by a simplistic analysis. In the unlikely event someone thinks I need to justify my criticism, let's just take this referenced paragraph (I did try to look for the hidden gem):

    "One valid argument, as expressed to me by former House Speaker Hastert, is this: “experience is important, not age.” Unfortunately, experience is not quantifiable, but age is. Besides, experience cannot be obtained without the time to do so. Therefore, I prefer a competitive minimum age of 55 without a loophole. Oh, isn’t age 55 today like age 35 some 200 years ago on the spectrum of life expectancy? In fact, age 55 becomes even more reasonable when it is predicated by 1-term (e.g. 6 years)."

    This belongs in the Onion blog, not the Opinion blog. It's the worst article I've read since ... reading LEAP's article (Euroland-2012-2016).

    The "About the author" section contains redundancies and flowery language that are not the professional standard.

  4. Dig Deep says :

    Your suggestion(s) ECB?

  5. ECB-Watch says :

    The author should learn to write persuasively and choose a topic over which he has an edge. For example, how does the Chinese communist party work.

  6. Dennis Roubal says :

    I would not take Mr. Hastert's words with much faith. We have had all kinds of experience running the gov't and what has that gotten us. Remember back, to the 1994 election, when many young Republicans were elected with the mandate of balancing the budget. They did it, for how long? Three years. Within a few years, anyone who goes to congress, experiences one of three outcomes: Rolls over and plays by Washington rules, meaning they are bought and paid for. Does not seek re-election, or is defeated by someone better funded who will maintain the status quo.

    For the most part, the public has been satisfied just re-electing experienced crooks. Our current mess is as much the consequences of a lazy electorate as anything else.



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved