A few days before the 2012 presidential election, Joe Scarborough, the conservative host of Morning Joe on liberal MSNBC, proclaimed, “Anybody that thinks this race is anything but a tossup right now is such an ideologue … they’re jokes.” He felt reports that put Obama ahead were biased, and he had one particular culprit in mind, Nate Silver, a presumably liberal polling expert who calculated that President Obama had a 79 percent chance of beating Romney.

There was just one problem. It turned out to be Scarborough himself whose judgment was clouded by bias—as Silver recognized when he offered to bet the anchorman $1,000 on the outcome of the election, a wager Scarborough wouldn’t take. Silver turned out to be amazingly accurate in how he called the race.

That’s the problem with media bias. We all know it’s there, and we all know we need to see it, detect it, and overcome it if we’re ever going to know the truth, but we also all see it in different places. All too often, we think whoever we agree with is unbiased. It’s the other guy, the one we disagree with, who holds the biased opinion. How, then, are we ever to get at the truth, the truth we need, not only just to know what’s going on, but to be responsible citizens in a democracy?

It’s a very old problem, and it’s not about to go away, though there are definitely things we can do to try to smoke out biased reporting and see the facts more clearly. We’ll get to that later, but first, a little history. Bias in the media wasn’t always considered a negative. In fact, until about 100 years ago, it hardly ever occurred to anyone that media should be unbiased. Everyone agreed that an informed electorate was the basis of a free society, but they didn’t take that to mean that the news should be delivered without a point of view. They did agree, however, that in the U.S. the freedom of the press was sacred. That was a founding principle of our nation, and one of the great things that set us apart from every government that had come before.

The idea of a truly free press was born in 1735, when a New York newspaperman named John Peter Zenger was put on trial for libel for defaming the royal governor. Zenger’s lawyer insisted that he was innocent because what he had printed was the truth. No law at the time protected a journalist who told truth that hurt a public official, but the jury set Zenger free anyway—and established the notion of a press unafraid to speak truth to power as a cornerstone of liberty.

What makes the jury’s decision all the more intriguing is that it was quite well known that Zenger’s paper had been founded expressly to attack the royal governor. Freedom of the press was considered to be quite a separate matter from bias, as indeed it should be. By the time of the American Revolution, the colonies were awash in partisan newspapers and pamphlets. One of the British outrages that led to the Revolution was the Stamp Act—which put a tax on newspapers. In Europe the press had always been controlled by the ruling aristocracy and bent to serve its purposes; in the colonies, it became the weapon of the people, and publications like Thomas Paine’s pamphlet Common Sense fired the people to revolt against their overseas overlords. The only kind of media bias anyone really worried about was bias imposed from above, by the king and his men.

And so, when the Constitution was written its very first amendment stated “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press …”

With those words, a free press was enshrined along with freedom of speech and religion as one of our most crucial liberties. The government went well beyond mere words in supporting it, too. Where other nations heavily taxed their newspapers, the young United States did the opposite. It subsidized them. The Postal Act of 1792, which established the nation’s mail service, gave newspapers discounted postage rates, and legislators often provided funding for papers in their districts.

With that help the American press flourished so much that by 1835 the U.S. had five times as many daily papers as the British Isles. However, high officials often hated and distrusted what the papers printed. In 1798 President John Adams went so far as to push through the notorious Sedition Act, which made it a crime to publish “false, scandalous, and malicious” writings about the president or Congress. The law would backfire badly, turning its victims into free-speech martyrs. Thomas Jefferson got rid of the Sedition Act soon after he was elected president.

Not all bias is political bias. In the 1830s James Gordon Bennett used sensationalism and colorful embroidering of the truth to build his New York Herald into the biggest newspaper in the world. As but one lurid example, his paper described the corpse of a murdered prostitute in 1836 as follows: “The perfect figure, the exquisite limbs, the fine face, the full arms, the beautiful bust, all, all surpassed in every respect the Venus de Medici.”

Newspapers were, after all, businesses first, and the primary concern was selling papers. By 1871 a British observer would describe the typical American newspaper as “a print published by a literary Barnum, whose type, paper, talents, morality, and taste are all equally wretched and inferior; who is certain to give us flippancy for wit, personality for principle, bombast for eloquence, malignity without satire, and news without truth or reliability.”

How biased was the press in the 19th century? In 1860 Bennett’s Herald reported that Abraham Lincoln was “a fourth-rate lecturer who cannot speak good grammar.”

By the end of that century, the United States was a nation of mass-readership newspapers. Joseph Pulitzer’s New York World led the way, with signs in its city room that read, “Accuracy, Accuracy, Accuracy! Who? What? Where? When? How? The Facts—The Color—The Facts!”

Despite the noble motto, in the World and in its archrival, William Randolph Hearst’s Journal, “there was a lot of willful omission and lying,” as Brooke Gladstone, media historian and host of the NPR show On the Media, points out in her book, The Influencing Machine. Hearst himself is best remembered for his (possibly apocryphal) 1897 telegram to the artist Frederic Remington, who told him there was no fighting in Cuba to report on: “Please remain. You furnish the pictures, and I’ll furnish the war.”

The tide began to turn with the century. Adolph Ochs bought The New York Times in 1896 and announced that it would henceforth “give the news … impartially, without fear or favor, regardless of party, sect, or interest involved.” Lack of bias became a new ideal in the Progressive Era of the early 1900s. In 1904 Joseph Pulitzer endowed one of the first journalism schools, at Columbia University, to “raise journalism to the rank of a learned profession,” and others soon followed. In 1922 editors founded their first professional association, the American Society of Newspaper Editors, and drafted a code of ethics that declared, “News reports should be free from opinion or bias of any kind.”

Balancing Act The Saturday Evening Post

On New Year’s Day, Congress finally, at the very last moment, passed the fiscal cliff legislation that saved the economy from free fall. Everyone on every side of the negotiations made sacrifices to make it happen. Or so it seemed. But one pharmaceutical company got wording stuck in the bill that will bring it hundreds of millions of dollars over the next couple of years.

The law ensures that Amgen, the world’s largest biotechnology business, will have two years to sell its dialysis pill Sensipar without any limits on what Medicare has to pay for it, even though the fiscal cliff bill is supposed to save $4.9 billion over 10 years by reducing overpayments for dialysis drugs and treatments. Exempting Sensipar from those controls will cost Medicare as much as $500 million.

How did the company arrange such a windfall? The provision requested by Amgen was added to the final draft of the legislation by Senate staff members, according to published reports. Why? Amgen has no fewer than 74 lobbyists in Washington, including the former chiefs of staff of both Sen. Mitch McConnell, the Senate minority leader, and Sen. Max Baucus. It has contributed more than $5 million to candidates and their political action committees since 2007. Those lobbyists had repeated meetings with senators’ staffers in the fall. Critics contend that bowing to special interests is part of the reason for our current dilemma.

“Sadly, the lawmaker-lobbyist cabal has once again acted to serve their own financial interests; continuing to place patients at risk and passing the costs on to the taxpayer,” Dennis J. Cotter, a health policy researcher in metropolitan Washington, D.C., told the Post.

Amgen is a very big lobbying presence in Washington, but there’s nothing that special about it. Just about every business there is, from AAI Corporation to Zurich Financial, has its lobbyists prowling the halls of Congress, doing everything they can to serve their industries’ purposes, sometimes at the expense of the greater good. So does just about every special interest group.

Lobbying is a huge business. According to the Center for Responsive Politics, there were 12,051 registered lobbyists in Washington in 2012, and they spent a total of $2.47 billion trying to get government officials to do their bidding. The biggest spender of all? The U.S. Chamber of Commerce, which forked out almost $96 million on lobbying, followed by the National Association of Realtors, $26 million. One of the top industry sectors? Health, which spent $365 million—more than 10 times as much as organized labor.

How can so much money flowing around the nation’s capital not corrupt? It certainly does, and the revolving door between Congress and K Street, the main street of lobbying, is not just a myth. Almost two-thirds of all lobbying, in dollars spent, involves former congressional staffers. Is such a situation excusable? Should it even be legal?

Absolutely. In fact, it’s necessary. And even the founding fathers knew it. Our most revered, sacred law of all enshrines it. The First Amendment to the U.S. Constitution doesn’t just guarantee freedom of speech and religion. It says, in full,

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Those final words are what allows lobbying. As crucial as is our right to talk freely and worship freely, so is our right to present our concerns to Congress, and to “assemble” to do so—that is, to join forces as part of a special interest group. That’s how government works. Lobbying is as much a part of what makes representative government tick as voting or town hall meetings.

Furthermore, lobbying has evolved over time from a shady and secretive business, where outright bribes were commonplace, to a heavily regulated one, where transparency rules and where the great majority of lobbyists are open and forthright about what they do and how much they spend and why. As enormous a presence as lobbying has become in Washington (and there’s lobbying in every state capital and county and town, too), it is far more civilized and controlled and honorable today than it ever used to be. At various times, laws have been passed to make it more so, when its evils have become too undeniable.

During the very first Congress, in the 1790s, a senator wrote that a lobbyist had said “he would give [Rep. John] Vining a 1,000 Guineas for his Vote, but … he might get it for a 10th part of the Sum.” Men were already descending on Congress to try to influence votes on taxes, federal workers’ pay, veterans’ benefits, and other matters. One of the biggest earliest lobbying interests was the Bank of the United States, a quasi-government institution with enemies that included Thomas Jefferson and James Madison. Its lobbyists’ activities grew so pernicious and yet accepted that in December 1833 Sen. Daniel Webster of Massachusetts wrote to the bank’s president, “I believe my retainer has not been renewed, or refreshed, as usual. If it be wished that my relation to the bank should be continued, it may be well to send me the usual retainer.” Could Tony Soprano demand a payoff more bluntly?

That’s not all Tony Soprano could relate to. According to the late Sen. Robert C. Byrd, who made a study of lobbying in the early United States, “clubs, brothels, and ‘gambling dens’ became natural habitats of the lobbyists, since these institutions were occasionally visited by members of Congress, who, far from home, came seeking good food, drink, and agreeable company.”

By 1869 a newspaper columnist could write this lurid description: “Winding in and out through the long, devious basement passage, crawling through the corridors, trailing its slimy length from gallery to committee room, at last it lies stretched at full length on the floor of Congress—this dazzling reptile, this huge, scaly serpent of the lobby.”

What exactly was the serpent up to? America’s first big industry, the railroad, was growing fast at the time, and it begat America’s first big organized lobbying effort. Laying rails across the country involved getting major government land grants and subsidies, and railroad barons hired hundreds of lobbyists at a time. Their work included giving lawmakers passes for free train travel and even cash payouts. The early railroad lobby reached an ugly peak in the Crédit Mobilier scandal of 1872, when senators and congressmen were given free railroad stock in return for passing railroad-favorable laws.

Learning to Love Our Lobbyist Friends The Saturday Evening Post

Will 2012 go down in history as the year money took over politics? Both parties will have spent more than a billion dollars electing the next president. More and more of that money comes from a handful of the wealthiest Americans and the corporations they run. On the Democratic side, Jeffrey Katzenberg of DreamWorks, telecommunications pioneer Irwin Mark Jacobs, and hedge fund manager James Simons have donated millions to re-elect the president, but the amount of money the Democrats have received from deep-pocketed supporters pales in comparison to what Republicans have received. A single billionaire, business magnate Sheldon Adelson, had by August spent more than $41 million and promised to spend up to $100 million defeating President Obama and other Democrats. All told, the top .07 percent of donors give more money than the bottom 86 percent. And it pays off. Candidates spend ever more time courting the super rich and then, once in office, try to keep them happy. This summer, for example, Mitt Romney held two fundraisers at which he raised almost $10 million from the oil and gas industry and then announced that as president he would end more than 100 years of federal restraint of oil and gas drilling on public lands. Things like that happen on both sides. How did we get into such a situation? What is to be done about it? Is it threatening our democracy? And doesn’t it go against everything the founding fathers stood for?

Many of the founders, including George Washington and Thomas Jefferson, were themselves among the wealthiest people in the country. They felt their prosperity made them obliged to serve their nation at the highest level. Yes, they declared independence and fought a Revolution to escape the tyranny of English monarchy and might, but they expected to replace aristocracy of birth with aristocracy of accomplishment, rule by elites who had created their wealth and influence, not inherited it. That was why they wrote a Constitution that stated the president was to be elected not by the people but by an elite Electoral College, and the Senate was to be chosen not by the people but by state legislatures. And that was why in most states only men who had money and property were allowed to vote at all.

It didn’t take long for the 99 percent of the day to rebel against that status quo. The notion of true democracy, rule by ordinary people, grew popular in the early 19th century. It was spearheaded by President Andrew Jackson, who hated bankers and banks, especially the national bank that had been founded by Alexander Hamilton. He destroyed the bank, partly to counter the power of the richest Americans. At the same time, a new generation of wealthiest Americans emerged, and they were a breed that had never existed in Europe—industrious, self-made men of humble origins, such as John Jacob Astor, a German immigrant who began working in a menial job for a fur merchant but came to dominate the trade in furs from the West, and Cornelius Vanderbilt, who rose from ferryboat captain to steamboat owner and then railroad baron. In 19th century America, the wealthiest really did have something in common with the common man.

Or at least that was true in the American North. The elite of the South were a breed apart. They grew fantastically rich and powerful from growing rice and cotton with all the hardest labor done by slaves. Seven of the first 12 presidents were from Virginia, the most prosperous part of the South. When the Civil War came, it was a fight not only over slavery but between the power of new Northern industry and urban wealth and the spoils of the Southern slave economy as well.

As extreme as the power of the wealthiest is today, it pales before that of the rich in the pre-Civil War South, for they could own human beings who had no rights whatsoever. Slave owners had such full support of the law that the Constitution originally counted each slave as three-fifths of a man for voting purposes, not so that slaves themselves could vote, but to add to the headcounts on which Congressional districts were based, giving their owners even more political and electoral power than anyone who didn’t keep slaves. Slavery was by far the highest point of the tyranny of the wealthiest in the United States.

But the kind of abuse of power that’s more familiar to us today took off after the Civil War, when four years of bloodshed costing more than a million lives left the South crippled and the North as a new industrial world power. That power corrupted, as it always does. The Gilded Age—which lasted from the end of the Civil War to 1900—was a festival of power grabs among the wealthiest. For instance, to build the Transcontinental Railroad, the owners of the Union Pacific Railroad set up a construction firm called Credit Mobilier to wildly overcharge for the work it did, just so they could bleed their own company and bondholders. Then, to make sure Congress didn’t complain, they gave assorted Congressmen both cash bribes and stock that paid huge dividends. The scam got exposed in 1872. It was estimated to have stolen $42 million in government and bondholder money, and it led to the disgrace of public figures as high up as the vice president, Schuyler Colfax.

By the 1880s the Senate was dominated by millionaires. And by 1892, wealth-fed scandal had become so commonplace that opposition to it gave rise to a new political party, the Populists, whose platform announced, “We meet in the midst of a nation brought to the verge of moral, political, and material ruin. Corruption dominates the ballot-box, the Legislatures, the Congress, and touches even the ermine of the bench. … The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few. … From the same prolific womb of governmental injustice we breed the two great classes—tramps and millionaires.”

When Theodore Roosevelt became president in 1901, he ushered in the Progressive Era­­, one of two major periods in U.S. history when the political tide turned strongly away from the wealthiest—the other was during the presidency of his distant cousin Franklin Roosevelt. Roosevelt railed against what he called “malefactors of great wealth” and the “criminal rich,” and he pushed through reforms like strengthened railroad regulations and the creation of the Department of Labor. A decade later, President Woodrow Wilson cemented Roosevelt’s accomplishments by establishing the federal income tax and the direct election of senators.

Though none of that prevented the wild financial bubble fed by coziness between the wealthy and the government in the 1920s. So in the wake of the Great Crash that followed, Franklin Roosevelt took office in 1933 as a rich New Yorker determined to look out for the common man. He wrote to a friend, “The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government since the days of Andrew Jackson. … The country is going through a repetition of Jackson’s fight with the Bank of the United States—only on a far bigger and broader basis.” He raised taxes on the rich and used much of the money that came in to put the unemployed poor back to work. In 1936 he wrote: “We know now that Government by organized money is just as dangerous as Government by organized mob. … I should like to have it said of my first Administration that in it, the forces of selfishness and lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.”

America’s Wealth Gap The Saturday Evening Post

Illustration by Brian Stauffer

Just about every American can cite a personal example of the staggering benefits—and equally staggering costs—of today’s medicine. Here’s mine: My older brother Stephen was diagnosed more than 40 years ago with Crohn’s disease, a devastating chronic abdominal illness that had no cure and no good treatment. He was a teenager then, and he led an adult life of constant pain. He finally died of colon cancer at the age of 44 in 1996. Six years later, in 2002, I too was diagnosed with Crohn’s after worsening abdominal pain and bleeding left me bedridden. I had to be hospitalized for two weeks, but in the hospital I began treatment with a new cutting-edge biological drug called Remicade that had been introduced after Stephen died. Within months my symptoms were virtually gone, and I have been in robust health ever since. I was saved, miraculously, in a way my brother never could be.

Here’s the catch: There’s still no cure. I need a Remicade treatment every eight weeks. I learned when I left the hospital that it was going to cost more than $3,000 for the drug and $800 for the doctor’s services every time. Since then the price has risen to where the hospital at which I get treated puts in a claim for $22,000 and my insurer usually settles for around $11,000, or about $70,000 a year. To my immense good luck, I have a generous employer with a great insurance plan that makes it all affordable. But I only go through with it because it is truly a matter of life and death, and I have lived in fear of not having a job and being unable to buy insurance to cover such an absolute necessity, all because of some not-yet-understood flaw in my DNA.

A century ago, medicine was both very primitive and very inexpensive by today’s standards. When people became very ill, little could usually be done. They either got better or they didn’t; they lived or they died. We all have grandparents who succumbed quickly to heart disease or cancer or other illnesses but today would likely be kept alive and returned to health at very great expense—to go on to incur further high expenses the next time something goes wrong. Last month my father had bypass surgery at the age of 89. That would have been unimaginable a generation ago. A friend of mine just had a hip replacement at the age of 95.

American-style health insurance, which covers too few people too expensively, began as a strange byproduct of World War II economic sanctions, of all things. During the war the government froze the wages paid by employers, but it didn’t freeze fringe benefits. Companies that wanted to compete for employees did what they could to offer them something special—they began giving them health insurance. And so the system we all know, employer-backed insurance policies handled by private, profit-seeking insurance companies, arose, not from a plan but as an odd spin-off of wartime price controls.

People without medical insurance wait in long lines around the block to see doctors at a free medical clinic at the Sports Arena in Los Angeles in 2011.

By the 1960s, many working Americans had sufficient insurance through their employers, but the poor and the aged did not. That was why in 1965 President Lyndon Johnson pushed through the bill that created Medicare and Medicaid. Medicare was designed to cover the elderly and the disabled; Medicaid insured the poor. With them in place, most Americans had health insurance at last.

But the unending, growing stream of new technologies and new pharmaceuticals was setting the cost of medicine on an inexorable upward path. Health insurers, wanting to keep their costs down and profits up, started charging people different amounts for coverage, according to how risky they appeared to be, and avoiding the riskiest customers completely. That meant that the people who need insurance most have the hardest time getting it, and when people don’t have insurance they wind up going to emergency rooms more and incurring even higher costs. And, let’s be clear about this, these higher costs get shared among all the rest of us. Congress passed the HMO Act of 1973 to promote health maintenance organizations (HMOs) that could negotiate with doctors and hospitals to set lower prices. But HMOs had every reason to simply minimize treatment, and many of their customers came to feel they were being forced to accept second-rate care. The failed Clinton health reform plan of 1993 tried to fix that, but it was hopelessly complicated, devised in secret, and never even reached a vote in Congress. The next attempted solution was PPOs, or preferred provider organizations. They have generally meant more generous coverage for employees but even higher costs for employers, who have responded by raising their premiums and deductibles or even dropping insurance altogether. And so everyone’s costs have kept going up, and more Americans have become uninsured.

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2000

With costs going up everywhere, why do we in the U.S. pay more and get less than anyone in any other advanced nation? Because our accidental, improvised system pits doctors against insurers against patients. It is broken. Doctors earn the most when they do whatever costs the most, regardless of results. Insurance companies wage constant battles against doctors and hospitals to pay as little as possible of those unrestrained costs. And patients have little way of understanding what treatments they really need, what anything will cost, or what they can do about costs once they hit.

Ultimately the cause of this chaos is our belief that a free market is the best way to organize and regulate the system. We believe that if we can figure out how to create a smoothly working market for healthcare, just as we have for food and housing and automobiles, our problems will take care of themselves. But as was first explained in 1963 by Kenneth J. Arrow, a Stanford University economist who would later go on to win a Nobel Prize, that’s simply not possible.

Fixing Our Healthcare System The Saturday Evening Post

It began in the colonial era when we had no conventional banks of our own. Banks were all in England, and England made sure they stayed there. So banks, right from the start, represented the wealth and domination of our foreign overlords. We didn’t even have a single kind of money; people used British and French coins and Spanish dollars, among other things, or just bartered goods. In Virginia, tobacco was used as money. Some colonies issued paper notes redeemable in gold. Not until 1775 did the Continental Congress issue the first all-American paper money used to fight the Revolution. With no gold or silver backing, the currency quickly lost value—thus the expression “not worth a Continental,” which survives even today.

It was Thomas Jefferson who gave birth to the American dollar and came up with the then-novel idea to divide it into an utterly rational 100 cents. Shortly afterward, Alexander Hamilton founded one of the new country’s first banks, the Bank of New York. He was still in his twenties at the time, and five years later he became the first Secretary of the Treasury.

1791: Our First National Bank

If you disapprove of the national debt, the blame goes back to Hamilton. He argued that the nation needed to be able to take on debt—to issue bonds and to invest in building and growth. National debt also was a tool that allowed the federal government to take over the various states’ crushing war debts. To oversee the flow of money, regulate all the country’s smaller banks, and manage the debt, he founded a national bank (the Bank of the U.S.).

Hamilton’s idea was that only a central bank could impose order on American money and banking. But Jefferson opposed the idea bitterly. He embodied the American horror of banks as manipulative tools of the rich. He once wrote, “My zeal against those institutions was so warm and open at the establishment of the Bank of the U.S. that I was derided as a Maniac by the tribe of bank-mongers, who were seeking to filch from the public their swindling, and barren gains.”

Jefferson was vindicated when almost right away there was a banking scandal. In 1792 people began starting up new banks and selling stock in them; there were rumors that the new national bank would buy at least some of the stocks, and a speculative bubble formed, expanded, and burst. The main speculator, William Duer, wound up in debtor’s prison, and Jefferson estimated that $5 million was lost.

In 1811 the Bank of the U.S.’s charter was allowed to expire, and, with no central authority, the banking business quickly became messier—true to Hamilton’s prediction. There was no national paper money, only banknotes printed by individual banks, and they were typically worth far less than their face value, depending on how much faith people had in the banks behind them. For the entire century, a series of tumultuous events periodically sapped American faith in the banking system. The major disasters included:

• Depression. A deep national economic depression that lasted for years hit in the late 1830s. The problem was caused by a rash of speculation on Western lands paid for with paper money issued by weak banks.

• Crash. Another big banking collapse followed in 1857. The blame is traced to the California Gold Rush, which pumped excessive amounts of money into the economy, leading to a tsunami of reckless borrowing and lending.

• Bad paper. In 1861 President Lincoln started printing the first federal paper money to pay for the Civil War. But without a federal bank behind the money, it lost value just like the old Continentals. In fact, the government itself didn’t accept these “greenbacks” for payment of taxes.

• Bust. Another speculative bubble burst in 1873 leading to still another depression that lasted six years.

• Panic. In 1893 a financial fever broke out that put more than 500 banks out of business, leaving many of their customers broke. The main problem this time was that silver strikes in the West meant there was suddenly a glut of silver. Therefore silver coins became worth less for the value of the raw metal than gold ones despite their equivalent face values. Naturally people started buying the more valuable gold coins with their silver coins, draining the federal Treasury.

1861: Confederate Money

Although the country had no federal bank in these years, it did finally get a head of banking, but a completely unofficial, self-appointed one. That was John Pierpont Morgan, by far the most powerful banker of his age. Morgan believed that the most important thing in business was character—an all-too-rare virtue then as now. He once said that “a man I do not trust could not get money from me on all the bonds in Christiandom.”

Morgan stepped in as America’s unofficial head banker to solve the crisis of 1893, finding a way to buy gold in Europe to keep the Treasury from running out of the metal that was the basis of American money. Still, the nation had to endure a depression that lasted for years, and in the 1896 presidential election people who had put their money in silver—largely Western and rural people who hated banks—rallied behind William Jennings Bryan and his famous proclamation that “you shall not crucify mankind upon a cross of gold.”

By 1907 the economy had grown much bigger than all the government’s gold could cover, yet the nation was still on a gold standard. That meant too much borrowing and too much circulating money against too little metal on reserve to guarantee the money’s worth. Another panic hit, and again Morgan had to come to the rescue. He announced that “if people will keep their money in the banks, everything will be all right.” That was entirely true, but saying so wasn’t enough. He singlehandedly called all the nation’s top bankers to his New York City mansion and got them to raise money so cash could keep flowing and to cooperate to keep weaker banks from going under.

This time a depression was averted, but the need for a strong central national bank was finally recognized. It came into existence in 1913 in the form of the Federal Reserve (Read on the Federal Reserve). The Federal Reserve could try to control the health of the economy and banks in general by setting interest rates for its own lending that would set a standard for how much or little borrowing and lending there would be, slowing down the economy when there was too much money and exuberance and speculation and then turning the spigot back on when there was too little. That worked, most of the time, until the Stock Market Crash of 1929 and the Great Depression that followed.

Financial game-changers who are on the money.
Click on the image to view it full size.

The Crash of 1929 was driven by the widespread belief in an endlessly growing economy. (continued on page 70) There was wildly excessive borrowing and investing in overvalued stocks. When it all came tumbling down, banks failed by the thousands. More than 3,000 of them went under in 1931 alone. Another 1,453 failed in 1932, and thousands more in 1933.

In 1933 Franklin Roosevelt was elected president. He leapt into action, immediately closing all the nation’s banks for several days as he pushed through Congress a bill to give the government unprecedented new powers to regulate the whole system. He also effectively took the nation off the gold standard, allowing the dollar to decline in value so that people’s debts would be worth less—and easier to repay. He made the Federal Reserve much stronger than it had been before. And, most important, he pushed through the Glass-Steagall Act. That law put a federal guarantee behind bank deposits, automatically increasing public confidence in them, and it also made banks choose to be either deposit businesses or investment businesses but not both. Banks could no longer be safe harbor for people’s hard-earned savings and casinos at the same time.

Finally, after more than a century and a half, the U.S. had a truly solid banking system. There had been runs on banks and major waves of bank failures throughout our history; there hasn’t been one since. This country has not been immune to crises, however. In the early 1980s there was the savings and loans (S&Ls) debacle. S&Ls were small local savings banks that dealt mainly in savings accounts and home mortgages instead of checking accounts and business loans. They ran into trouble because they weren’t allowed to raise the interest rates they paid on savings accounts when interest rates everywhere else were rising, so people started withdrawing their money from them. The government responded by letting them raise those rates, but the banks’ home mortgages didn’t make enough money to pay for the high rates. S&Ls went bankrupt en masse, and the federal government had to pay $20 billion in insurance to their depositors.

In the 1990s the federal government for the first time let banks operate across state lines, leading to a long series of mergers and the rise of the nationally operating institutions we’re all familiar with today. Unfortunately, it also—after more than half a century of dependable if unexciting banking—lifted Glass-Steagall’s ban on speculative investment by deposit banks.

2008: As banks teeter on verge of collapse, George W. Bush asks Congress for emergency funds. TARP Program loans banks $700 billion. Fallout: Most banks have since repaid TARP loans plus interest, but economic damage lingers. Many argue bailout undermines confidence in free enterprise system.

That development was one of the causes of the recent Great Recession, as banks discovered they could make the most of the housing boom—which turned into the housing bubble—by gambling on it, bundling ever-more-dubious mortgages, slicing them up, and blending them together to turn them into seemingly fail-safe investments. The banks’ gamble ended not only with millions of Americans bankrupt and homes in foreclosure but also with the huge government bank bailouts of late 2008. It then led to new attempts at stronger regulation again, including the Dodd-Frank Act and its Volcker Rule, which attempts to reinstate some of Glass-Steagall’s prevention of speculative betting by banks. However, many bankers are aghast at the new regulations, especially the Volcker Rule. Jamie Dimon, the head of JPMorgan Chase, recently said of the former Federal Reserve chairman who devised the rule, “Paul Volcker by his own admission has said he doesn’t understand capital markets. He has proven that to me.” The law is unquestionably extremely complex and expensive for banks to implement. Its proponents say it will keep the economy safe; its enemies say it will strangle the economy.

In other words, after centuries of hard experience, we still can’t agree about banking, how powerful banks should be, or how free they should be to do what they want to—or think they must—do. What then have we learned, after more than 200 years of banking disasters? We’ve learned a lot, actually. We’ve gone from a small, new, rural frontier nation of no banks at all to the world’s modern economic behemoth with banks and banking power to match. We’ve grown very painfully at times, but we’ve grown in ways no one ever could have begun to imagine. And we at least were able to keep the Great Recession from becoming another Great Depression. Unemployment reached 10 percent in 2009, but it hit 24.9 percent in 1932—and didn’t fully recover until World War II.

In the end there may, sadly, be a limit to what we can learn and how much we can control about banking. The people who run banks are only human. They see the world imperfectly, as we all do, yet they must make decisions of great consequence based on what they see. Only a national bank can try to control the sum of what all the nation’s bankers do, but that is almost like controlling the weather. An economy is the total of everybody’s activities everywhere, so it is as complicated as all the wind and rain and sunshine in the world combined. And even if bankers were superhuman and we could truly dominate something as complex as weather or an economy, there would still be that vexing choice between risk and opportunity. We all want a higher return on our investments, but that means taking a greater risk that we’ll lose it all. We all want to borrow at lower rates, but that means less money going into banks to create those higher returns we want. We all want to take chances, but we don’t want to be hurt if those chances go wrong.

Our whole economic system, like our political system, is but a reflection of the imperfectability of human nature. And that is why capitalism is, as Winston Churchill once said of democracy, the worst possible way of doing things—except for all the other ways that have ever been tried.

BANKS: A Love Hate Story

U.S. Banks: A Historical Timeline.
Click on the image to view it full size.

We can’t live without banks, but that doesn’t mean we have to admire them. Banking excesses and the attempts to curb them have shaped our economy since the founding of the republic.

In recent years we’ve seen the bailout of some of our largest banks—with the resulting hue and cry of such diverse groups as Occupy Wall Street and the Tea Party. Most banks have since paid off their loans, but critics warn that a “too big to fail” mentality will ultimately harm the nation.

Will a few big players—the top five banks today control more than half of all U.S. assets­—now be encouraged to engage in even riskier behavior, knowing the government will step in to catch them if they fall? Have we undermined the free enterprise system—not to mention the American sense of fair play—by sending the signal that the system supports the strong and abandons the weak?

Finally, did the bailout even work? Four years later the financial markets are in better shape, but unemployment continues to be unacceptably high, state and local governments are starved for cash, and housing has not yet recovered.

Some experts also ask whether it is even possible to manage domestic finance in a global economy: Today, more than ever, the collapse of a foreign country would have disastrous ripple effects on our shores.

Love it or hate it, the bailout is best understood in the context of the historical tug of war between those who support federal banking authority and those who oppose it. The latter group warns of the excess power and potential for corruption in a central bank; those favoring a centralized bank believe a united authority is essential for managing the money supply and the national debt. Key dates in banking history are at right.

Read Jekyll Island and the Secret Behind the Fed for more history from the Post.

Too Big to Fail? The Saturday Evening Post

Illustration by B.B. Sams/© SEP.

In the past year we’ve watched Washington, D.C., freeze into paralysis. The wheels of government have nearly ground to a halt as Congress barely even agreed to provide the money for spending already required by laws it had earlier passed. And the inhabitants of the two sides of the political aisle bitterly blame each other. Ask Republican Congressman Allen West who’s at fault, and he says the Democrats who have “a vicious propaganda machine. It espouses lies and deceit.” Ask Senate Majority Leader Harry Reid, and it’s entirely the Republicans who stop all progress with “obstructionism on steroids.” Ask the American people, and they agree with both; according to at least one recent poll, they blame the two parties equally. There seems to be something fundamentally wrong with our two-party system.

In fact, passing the buck seems to be the only thing the parties can agree on right now. They each agree that the other party is broken. So it’s hardly surprising that there is serious talk of a third-party presidential candidacy this year. Ron Paul, the libertarian Texan, has suggested he may run on his own if he doesn’t win the Republican nomination, and an outfit called Americans Elect has worked quietly but diligently to make sure the paperwork has been done to assure that some third-party candidate can run in all fifty states. Almost everyone is fed up with Democrats and Republicans.

Are we on the verge of the collapse of the two-party system? You might think so, but it has been amazingly resilient, surviving through catastrophes as great as the Civil War and the Depression. The last time a president was elected who wasn’t a member of today’s Democratic or Republican party was in 1848. “E Pluribus Unum” says the motto on the Great Seal—“Out of many, one.” Maybe that should be “Out of many, two.” A recent Gallup poll found that 31 percent of Americans identify themselves as Democrats and 27 percent as Republicans. Considerably more—40 percent—are independents, disdaining both parties. But that leaves only 2 percent to belong to any other party out there.

How did it get this way? Can it really last much longer? And what, at bottom, do the two parties stand for?

At the very beginning, the founders didn’t want parties, yet we’ve had them almost always since. There seems to be something basic to both human nature and our political system that makes us split along either/or lines. Those either/or lines have shifted and drifted over the centuries, but they’ve almost never not been there.

The electoral college elected the first president, George Washington, in 1788 unanimously. He was so indisputably the right choice that no other candidate was even imaginable. Yet by the time he delivered his farewell address in 1796 near the end of his second term, national unity had so ruptured into two battling sides that he felt compelled to warn of “the alternate domination of one faction over another … a frightful despotism” that would bring “disorders and miseries.” Thomas Paine, on the other side of the new political divide, responded that “the world will be puzzled to decide whether you are an apostate or an impostor, whether you have abandoned good principles, or whether you ever had any.” And that was George Washington he was talking about. The parties have been at each other’s throats since the very start.

At the heart of that gulf, then just as today, lay a tension between wanting a relatively big, active government and wanting a small, unthreatening one. Washington and Alexander Hamilton, his first secretary of the treasury, were among the champions of a nation of strong, well-enforced laws that actively worked to encourage banking and manufacturing and trade. On the other side, Thomas Jefferson idealized a land of free, independent farmers whom government would touch only with the lightest hand. Hamilton’s side became known as Federalists, Jefferson’s as Democratic-Republicans. In 1796, in the first contested presidential election, Jefferson faced off against the Federalist John Adams. The law then stated that whoever got the second-most votes became vice president, so Jefferson had to end up awkwardly serving as his political enemy’s second-in-command.

In 1800 Jefferson won the top job, and in his inaugural address he expressed the hope that the two-party system could become a thing of the past, saying, “We are all Republicans. We are all Federalists.” No such thing happened. However, the Republicans had the upper hand for quite a while, winning the next five presidential elections. The Federalists came to seem elitist, and by 1828 they appeared to be withering away. But in the election that year the Democratic-Republicans split into two factions, creating what became the two parties of the next several decades. Andrew Jackson won in 1828 under the banner of a new Democratic party. He was frontier-born and a war hero, a man of the people, a strong upholder of individual liberties against institutions such as a national bank—and the farthest cry yet from the kind of Virginia aristocracy that George Washington had personified. Jackson’s party grew into the Democratic party we still know today. The other party, the Whigs, was the remnant of the Federalists and less populist Democratic-Republicans.

Not gonna take it: Launched as a tax protest, the Tea Party movement grew into a position of influence in the Republican Party and is poised to break out on its own. Photo by Sage Ross.

That pairing lasted until the 1840s when the issue of slavery poisoned everything. Think there’s a lack of civility in politics today? Emotions about this issue grew so violent that when Senator Charles Sumner of Massachusetts angrily denounced slave owners in 1856, Representative Preston Brooks of South Carolina beat him almost to death right on the Senate floor. The Whig party split apart and crumbled in the 1850s. After a flurry of short-lived parties with names like Free-Soil and Know-Nothing flared up and died, a new anti-slavery party emerged: the Republicans. It elected its first president, Abraham Lincoln, in 1860, and it survives as the Republican party of today.

And so the two parties we still know—Andrew Jackson’s Democrats and Abraham Lincoln’s Republicans—were already in place 150 years ago. They have evolved and changed continually, though. Throughout the rest of the nineteenth century, the Republicans were the party of business and of relatively strong centralized government power, partly because the opponents of slavery had tended to be prosperous citizens of the industrialized, urban North. Meanwhile the South became overwhelmingly Democratic, in opposition to the party that had risen from the antislavery movement. The Democrats were the party not only of the white-dominated South but also of states’ rights and small government and rural interests.

From time to time events shifted the two parties and their relative power. At the turn of the twentieth century a “progressive” movement grew up that sought to clamp down on big business. A Republican progressive, Theodore Roosevelt, served as president from 1901 to 1909, and the Democrats elected their own progressive, Woodrow Wilson, in 1912. But in the boom years of the 1920s, old-fashioned business-friendly Republicans took charge again—until the crash of 1929 and the Depression.

By 1932 Republicans had held the White House for 11 straight years, but the Republican-led boom had turned into a Republican-led bust, and in the depths of the Depression the nation elected a Democrat, Franklin D. Roosevelt, who would serve until his death in 1945. There would be a Republican in the White House for only eight years between 1933 and 1969. Roosevelt won all but two states in 1936, and the Republican Party appeared to be all but dead.

As the nation fought a world war and climbed out of the economic depths, however, the Republican party slowly healed its wounds. It almost won the White House in 1948 when the Chicago Tribune ran its infamous mistaken “Dewey Defeats Truman” headline. It did take the presidency in 1952, electing the greatest military hero of World War II, Dwight D. Eisenhower. It barely lost to John F. Kennedy in 1960.

The 1960s were a time of tumult for the two parties just as they were for America as a whole. The Vietnam War drove a Democratic president, Lyndon B. Johnson, to announce that he wouldn’t run for reelection in 1968, and the agonies of the Civil Rights movement, which he had championed, led many white Southern politicians to abandon the Democratic party just as they had swept into it a century before. From 1969 to 1993 there would be a Democratic president for only four years, during the single, luckless term of the last of the powerful Southern Democrats, Jimmy Carter.

Today the same two parties still dominate the political world in the U.S. The Republicans are broadly seen as the party of business and of less rather than more government action and regulation. The Democrats remain the standard-bearers for organized labor and the entitlements that grew up with Franklin D. Roosevelt’s New Deal. The Democrats are generally considered the stronger party among blacks and other minorities as it has been since the Civil Rights movement of the 1960s (and it had been gaining ground among those minorities earlier), but since race is a much smaller part of our national politics than it once was, that is less of a defining difference now than in the past.

Populist uprising: Occupy Wall Street protesters made the “99 percent” slogan notorious. Protesters gathered at Zuccotti Park on Wall Street in November. Photo by David Shankbone.

Why are the parties getting along so terribly right now? It hasn’t always been this bad. They have sometimes seemed especially polarized and antagonistic but sometimes quite similar and cooperative. They grew somewhat alike during the progressive era; they were bitterly opposed during the presidency of Franklin D. Roosevelt and the New Deal. They had much in common during much of the late twentieth century when Republican Richard Nixon carried on some of the Civil Rights initiatives of Democrat Lyndon Johnson and when Democrat Bill Clinton realized some of the welfare-limiting and budget-balancing dreams of Republican Ronald Reagan. Basically, they have tended to move closer together when economic times are good and there is less to drive them apart. Since the Great Recession began in 2008 and economic times turned bad, they have been as sharply divided as ever.

What lies at the base of all their differences, beneath all the individual policy matters they face off about such as abortion and immigration policy and tax breaks for the wealthy and so much else? And what has made them endure for so long? Why do we have two parties instead of three or four or more? There is probably just one answer to all these questions: The parties, at bottom, represent fundamentally opposed basic concepts of government. They stand for government as either essentially good or essentially bad. Americans who believe that government can and must be a powerful force for good tend to be Democrats. Americans who believe that government gets in the way more often than it helps, that it should be as limited and small as possible, tend to be Republicans. Before Franklin D. Roosevelt, Democrats were more the small government party and Republicans the big government one; Roosevelt’s New Deal and the rise of the broad government programs we have had ever since turned that around. The shift of the South from Democratic to Republican in the 1960s and 1970s cemented that change.

However, as dangerously and irreconcilably divided as the parties seem right now, they’re almost certainly not about to crumble. In fact, the sharpest rift right now may be within one of the parties, the Republicans. Since the rise of Tea Party power in the 2010 elections, the Republicans in the House of Representatives have been embattled among themselves, with speaker John Boehner struggling endlessly—often hopelessly— to get them to agree on anything. Similarly, the lead-up to the 2012 Republican primaries has been marked by a stubbornly unyielding polarity between staunchly conservative and Tea Party-favoring candidates like Michele Bachmann and more moderate ones like Mitt Romney. It may be that the Republican party will soon redefine itself, as both parties have so often done in the past, but there’s nothing happening to suggest that we’ll soon have three or four major parties.

Why? Because so much of what people disagree on comes down to that basic tension between big, strong government and small, limited government. And that tension can probably never be finally resolved, at least in a nation that is based on free enterprise and individual liberty and initiative—and that is also based on equal opportunity and equal rights and fairness for all. The division between left and right will probably be with us always. In fact, it has become so central to our national psyche that I’d suggest another way of looking at the great divide, by seeing us all as a great American family with a timeless family dynamic.

If indeed we are in any sense a national family, then maybe, just possibly, in an abstract sense, within that family Republicans are our father and Democrats are our mother. I mean this: Your stereotypical father protects the home fiercely but also expects his children to be strong and resilient and self-reliant and to learn by tough love and end up looking out for themselves, just as Republicans are stereotypically strong on defense and weak on coddling. Your stereotypical mother builds the nest and is nurturing and gives everyone their meal and wants all the children to embrace love and fairness, just as Democrats focus more on supporting workers and striving to lift up the poor and the struggling. It’s no coincidence that it’s mostly Republicans who attack “the nanny state” and Democrats who warn, “Big Brother is watching you.” These are of course clichés, both about mothers and fathers and about Democrats and Republicans. But doesn’t every cliché contain a grain of truth?

And if there is a grain of truth here, then I’d add that just as the traditional ideal of a strong family has two parents, a mother and a father, then perhaps also our nation does best with two parties, Democratic and Republican. They may fight noisily from time to time, but who would have it any other way? Who wouldn’t want to have both kinds of love and care and moral passion? We need them to balance each other and show us the whole range of love and support. The system, like any marriage, and even the institution of marriage itself, may be far from perfect, but what else could possibly be better?

Time for a Third Party? The Saturday Evening Post

The story begins more than a century ago in Imperial Germany. In 1889 Chancellor Otto von Bismarck got a law passed setting up an old-age insurance program that required German workers to contribute a portion of their wages to a fund that would pay them in their retirement. Why? In a time of frightening worker unrest and socialist ferment, Bismarck bluntly admitted that he wanted “to bribe the working classes … to regard the State as a social institution … interested in their welfare.” In other words, he feared he had to start doing more for the workers or they might rise up against him.

Before long other European nations followed. The U.S., with its powerful spirit of self-reliance and independence, did not. Yet old age was getting harder for Americans. By the end of the 19th century the nation had gone from mainly agricultural to industrial, from rural to urban, and from extended families in which generations stayed together to what we now call the nuclear family, of parents and children alone. Americans who worked in factories or offices could easily find themselves out of a job in economic hard times, and when they retired they couldn’t fall back on their families as their parents had. Also, people were living longer. That all added up to more and more people facing long old ages without any resources.

A timeline of Social Security

Click on the arrows or dates to scroll through key moments in this interactive timeline.

There were modest pensions for veterans and a few company pension plans, especially among railroads. After the Stock Market Crash of 1929 a few states tried to set up old-age pension systems, but didn’t have the power to effectively implement them. Most older Americans had nothing to fall back on. By 1934, it is estimated, more than half of the elderly in the U.S. were unable to support themselves.

Popular movements arose to challenge this dire situation and agitate for impossible solutions. Huey P. Long, then governor of Louisiana, started the Share Our Wealth Society, which called on the government to guarantee every family in the nation an income of at least $2,000 a year (about $33,000 today), plus a pension for everyone over 60 and confiscation of every personal fortune above $8 million. By 1935 Share Our Wealth had 7.7 million members. Francis E. Townsend, a broke 66-year-old retired doctor, launched a proposal in 1933 to pay every American over 60 $200 a month ($2,400 today) on the condition they spend the money within a month. The payments would be funded by a two percent national sales tax. He soon had millions of followers who organized Townsend Clubs across the country to promote his plan.

President Franklin D. Roosevelt said at one point, “The Congress can’t stand the pressure of the Townsend Plan unless we have a real old-age insurance system, nor can I face the country.” So, on June 8, 1934, he sent Congress a message urging it to enact “social insurance … to provide security against several of the great disturbing factors in life—especially those which relate to unemployment and old age.” He added that “lessons of experience are available from states, from industries, and from many nations of the civilized world.” He set up a committee of five cabinet-level officials headed by Labor Secretary Frances Perkins to come up with a plan.

The committee soon had a large staff and an array of subcommittees. The five officials divided their job into three parts, with one big group tackling unemployment insurance, one big group working on health insurance, and a much smaller group focusing on old-age security. The unemployment team bogged down in disputes, and the health care reformers were kept from doing much by opposition from the American Medical Association, which didn’t want doctors restrained by national regulation. The old-age group, however, came together on a plan where workers and their employers would each contribute, paycheck by paycheck, to a fund that would provide the workers a pension after they retired. It was a relatively moderate, conservative answer to the radical ideas of people like Long and Townsend.

At first the proposed Social Security law was attacked by liberals as doing too little and by conservatives as approaching socialism; but opposition faded, and President Roosevelt signed the Social Security Act of 1935 on August 14 of that year. The law included unemployment insurance, aid to dependent children, and other elements, but its biggest feature was the old-age part we now think of as Social Security. Taxes for it were first collected in 1937, and for three years the trust fund was built up before the first monthly Social Security check was written in 1940, giving Ida May Fuller, a retired legal secretary in Ludlow, Vermont, $22.54.

The idea was not to provide a pension where people would always get back the amount they put in; rather it was to collect a pool of insurance money from people and return it to them if and when they needed it. Thus what you receive depends on when you stop working, and a disabled worker can start collecting early and end up getting more than that worker paid in. Originally the law required you not to work at all after 65 to get Social Security no matter how much you had paid in. This requirement was intended to remove older people from the labor pool, creating more jobs for the young. The law also excluded farm and transient workers, domestic servants, and anyone working for someone with fewer than 10 employees. Those people may have needed Social Security the most, but legislators believed the tax would be too hard to collect from them.

The system has been modified and expanded many times since its creation. In 1940 benefits were added for a survivor of a retiree who died. In 1950 cost of living raises were introduced. Disability coverage was added in 1954. Also, Medicare and Medicaid, begun in the 1960s, are both officially part of the Social Security System. In the 1970s fixes started being made to keep the system from losing money; in 1977 the tax rate was slightly increased and benefits were slightly reduced, and in 1983 the retirement age was raised (to eventually reach 67 for full benefits) while the payout for early retirees and people still working was reduced.

Because the nation is going through an enormous demographic change with aging baby boomers, none of those adjustments has made the system permanently sound. There are now more Americans over 65 than ever before to take money out of the system and not enough younger workers paying in to keep up. Social Security’s financing is in need of repair. Nonetheless, the system is hardly on the brink of collapse, as some claim.

Around 56 million Americans, a sixth of the population, received Social Security benefits in 2011. The system is paying them a total of $727 billion. After years of taking in more than it paid out and building up a surplus, the system has just begun to dip into that surplus—the “trust fund” of government bonds, now at a peak of $2.6 trillion. No one can say exactly how fast the trust fund will diminish, but the Social Security Administration and the non-partisan Congressional Budget Office (CBO) both estimate that if nothing is done it will last until around 2036. But even in that extreme case, Social Security will be able to pay out as much as it takes in. It just won’t be able to pay recipients 100 percent of what they get now; instead, they’ll get something like 76 percent.

How can the loss of money be stopped? There are four possible ways: raise the retirement age; reduce benefits or cost of living increases; raise the top income level for paying Social Security taxes; or raise the Social Security tax rate. If the tax rate were raised from its present 12.4 percent, half paid by employees and half by employers, to 14 percent, that would do it, according to the CBO. More likely is a mix of a smaller tax rise, a modest increase in the retirement age, and a rise in the cap on taxed salary.

In other words, Social Security has very real long-term funding problems, but it is not in a crisis that can’t be fixed. And as for those who say that its trust fund doesn’t really even exist because the government has spent all the money in it, in a sense that’s true—but it’s not a very meaningful sense. The trust fund’s money is all in government bonds, which pay an average of 2.76 percent. Any bond is, in effect, a loan of money to the bond’s issuer and only has value if the bond issuer can repay the loan. The bonds that compose the Social Security trust fund are backed by the full faith and credit of the U.S., and it is almost universally agreed that the U.S. government is more dependable than any other issuer of bonds—or any other investment—on Earth. So the Social Security trust fund may not be 100 percent safe, but any other conceivable investment is probably less safe. That’s one reason why attempts to “privatize” Social Security—replacing the trust fund with individuals’ investments in stocks and other securities, such as President George W. Bush proposed in 2005—haven’t gone very far. After the recent stock market crash, privatization appeals to fewer people than ever.

And here’s a glimmer of good news in that long, uncertain future: Eventually, the flood of baby boomers will end, and older people won’t so greatly outbalance younger ones as they do in this unique period of history. So even if the next generation can’t retire quite as comfortably as Americans could in the unprecedentedly prosperous years since World War II, maybe the generation after that will be more comfortable again—as long as we don’t give up on a Social Security system that has worked wonders for millions of Americans for most of a century. There’s a reason it has been “the third rail of American politics” ever since House speaker Tip O’Neill first called it that in the 1980s: Everyone worries about it, but virtually no one wants to lose it.

Social Security The Saturday Evening Post

On the other hand, Charles Heller, co-founder of the Arizona Citizens Defense League, said that citizens carrying guns were what had saved Gabrielle Giffords: “The reason the perpetrator was caught was because of rapid action of the citizen militia. And it’s crucial, it’s vital, if a guy like that was to get loose and reload, it’s crucial to have armed people ready to defeat him.”

That kind of polarized reaction occurs every time there’s a big incident involving guns in the United States. Why? How did it get this way? How did we come to stand alone among advanced nations in both our love of guns and our disagreement about them? We really are unique in that way. Americans own nearly 300 million guns, and our rates of gun-related homicide are at least five times as great as in other advanced nations.

The story of our love-hate affair with guns turns out to be as old as the European settlement of America. When the first Europeans arrived they found a dangerous wilderness where they had to hunt to eat and always had to be ready to defend themselves in a land without laws. By 1650 they had gotten so in the habit of defending themselves that a Connecticut law required that “every male person … shall have in continuall readines[s], a good musk[e]t or other gunn, fitt for service,” and all the colonies had similar laws to make possible their localized assemblages of fighting forces, known as militias.

By the time of the Revolutionary War, guns represented not only protection against man and nature as well as a source of food but also freedom against English oppressors. King George had the British Army; Americans had their personal guns and militias. In the words of historian Clayton E. Cramer, “Americans used guns initially as tools for individual self-protection and hunting, but by the time of the American Revolution, firearms became symbols of citizenship, intimately tied to defending political rights. Gun ownership was not universal in early America—but in every period, in every region … gun ownership in our nation’s early history was the norm—not the exception.”

When 1,800 British troops marched toward Concord, Massachusetts, on April 19, 1775, 3,700 militiamen turned out with their guns to oppose them, and the armed rebels struck terror in the hearts of the British. Later in the Revolution, the Pennsylvania rifle, invented by a Swiss immigrant for hunting, gave Americans a big advantage over the British and their Brown Bess muskets. George Washington even had his troops wear hunting shirts because the British thought any American who hunted was “a complete Marksman.”

Americans appreciated their guns as crucial to their liberty. That’s why the second of the first ten amendments— the Bill of Rights—decrees that “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.” On the other hand a national army was seen as a potential source of tyranny. That’s why the Third Amendment, almost forgotten today, says, “No soldier shall, in time of peace be quartered in any house, without the consent of the owner, nor in time of war, but in a manner to be prescribed by law.”

After the Revolution, in the early republic, “hunting and fishing probably were the chief American sports,” in the words of historian Richard Hofstadter. “For millions of American boys, learning to shoot and, above all, graduating from toy guns and receiving the first real rifle of their own were milestones of life, veritable rites of passage that certified their arrival at manhood.” As the nation itself reached adulthood, it did so by rapidly becoming more urban and industrialized. The rise of industrialization was very much about guns, too, as weapons makers in New England showed the way from individual craftsmanship to the use of interchangeable parts and assembly-line production.

Many of the boys who grew up with guns in the early nineteenth century went on to become the conquerors of the Wild West, where the role of guns became part of legend. When movies came along, the Western hero, always ready to draw and shoot, became a central part of American popular culture, and he was followed by the private eye, the gritty cop, and the gangster hero. Films from The Great Train Robbery to High Noon to Bonnie and Clyde to Reservoir Dogs have never stopped immortalizing the American love affair with the gun.

If the central place of guns in American life goes back to the beginning, gun control has a much shorter history. Outside of the Second Amendment, there was no major federal gun legislation until 1934 when Congress passed the National Firearms Act. President Franklin Roosevelt championed that law as a way to fight organized crime, and it did so by putting prohibitive taxes on machine guns, silencers, and other tools of hoodlums. A Federal Firearms Act in 1938 added licensing for anyone wanting to sell firearms and record-keeping of who bought guns.

Nothing much more happened in the way of gun laws until 1968 when, in the wake of the assassinations of John and Robert Kennedy and Martin Luther King Jr., a Gun Control Act took effect expanding the requirements for licenses and record-keeping and adding to the list of those, such as convicted felons and drug users, who couldn’t legally buy guns. Since then, there has been a slew of laws, some of them—such as the 1986 Firearms Owner’s Protection Act—easing restrictions, and others—such as the 1993 Brady Handgun Violence Prevention Act—tightening them. It has been estimated that today there are altogether more than 20,000 federal, state, and local laws regulating guns. It’s a bewildering patchwork.

Not until the passage of the 1968 law and the growth of urban crime to record levels in the 1970s and ’80s did guns and gun control become a big political issue. The National Rifle Association (NRA) was barely political at all for most of its existence. Founded in 1871 by a group of Civil War veterans who wanted to improve marksmanship among Americans, it only started a legislative affairs division in 1934 when the National Firearms Act was before Congress. The NRA made its first presidential endorsement in 1980, supporting Ronald Reagan against Jimmy Carter. But today, with more than 4 million members, it is often cited as the most powerful lobbying organization in the nation. It spent $10 million on the 2008 presidential election, and, in 2011, Wayne LaPierre, its chief executive, said of President Barack Obama, Secretary of State Hillary Clinton, and Attorney General Eric Holder, “Why should I or the NRA go sit down with a group of people that have spent a lifetime trying to destroy the Second Amendment in the United States?”

That Second Amendment may itself be a main cause of the extreme polarization that LaPierre’s statement reflects. If guns are a central part of our history, of our tradition of standing up against oppressors, and of our sense of freedom to defend ourselves and to enjoy our lands, then the Second Amendment is the defining document certifying their place in our lives. But it is a very disappointing document, too, in that nobody can agree on what it means. If anything, it creates more problems than it solves.

Constitutional scholar Sanford Levinson wrote that “no one has ever described the Constitution as a marvel of clarity, and the Second Amendment is perhaps one of the worst drafted of all its provisions. What is special about the Amendment is the inclusion of an opening clause—a preamble if you will—that seems to set out its purpose. No similar clause is part of any other Amendment.” That opening preamble, of course, is “A well regulated Militia, being necessary to the security of a free State,” which is followed by “the right of the people to keep and bear Arms, shall not be infringed.” What does that mean, about a militia? Does it tell us that the amendment only means to protect ownership of guns for collective military use, or, to the contrary, does the second part of the amendment confirm that we can own guns, period?

No one ever gave a definitive answer until 2008 when the U.S. Supreme Court ruled in the case of District of Columbia v. Heller, but even then the court mainly proved that it, too, was bitterly divided over the matter. The District of Columbia had passed a law banning ownership of handguns and requiring that people who owned rifles and shotguns keep them unloaded and locked or disassembled. A group of gun owners had appealed the law up through lower courts to the highest bar in the land.

The Supreme Court split five to four. In the majority opinion, Antonin Scalia, joined by Chief Justice Roberts and Justices Kennedy, Thomas, and Alito, wrote that the amendment’s words plainly “guarantee the individual right to possess and carry weapons in case of confrontation.” He added that the preamble “does not suggest that preserving the militia was the only reason Americans valued the ancient right; most undoubtedly thought it even more important for self-defense and hunting.”

Justice John Paul Stevens, in the main dissenting opinion, wrote that the decision was based on “a strained and unpersuasive reading” that “bestowed a dramatic upheaval of the law.” He also complained, “The Court would have us believe that over 200 years ago, the Framers made a choice to limit the tools available to elected officials wishing to regulate civilian uses of weapons … I could not possibly conclude that the Framers made such a choice.”

So there remains as profound disagreement as ever over just what the Second Amendment means and how broad the fundamental American right to own guns really is. That disagreement will probably never go away. However, though the 2008 decision came out firmly in favor of gun ownership rights, it has not noticeably changed the landscape of gun control laws. Since it was issued there have been more than 80 suits filed to overturn gun laws; few if any of them have succeeded.

Pro- and anti-gun forces continue to quarrel, flaunting competing and conflicting statistics about whether the prevalence of guns in American society makes us more or less safe. But in a land where guns are a central part of our heritage, where we prize individualism and self-reliance, but also where the violence done by guns vastly exceeds that of any other advanced nation, the sides in the eternal gun debate will likely never fully agree. Still, they surely can get along better.

Sanford Levinson wrote his landmark study of the Second Amendment partly to convince his fellow liberals that they should stop jumping to the conclusion that the amendment narrows the right to gun ownership. He concluded by writing, “Perhaps ‘we’ might be led to stop referring casually to ‘gun nuts’ just as, maybe, members of the NRA could be brought to understand the real fear that the currently almost uncontrolled system of gun ownership sparks in the minds of many whom they casually dismiss as ‘bleeding-heart liberals.’ Is not, after all, the possibility of serious, engaged discussion about political issues at the heart of what is most attractive in both liberal and republican versions of politics?”

Guns & America The Saturday Evening Post

Ehrich had enormous luck, though. He discovered as a child that he was gifted as an athlete and gymnast. He took up magic, and before he was out of his teens he changed his first name to Harry and then his last name to Houdini—and he became the most famous magician who ever lived.

Ehrich Weisz was just one of 36 million people who poured into the United States in the century between 1820 and 1920. At the beginning of that period, the U.S. had a population of only 10 million. The newcomers dwarfed that number, and America became a land populated largely by recent arrivals and their descendants. Its culture and its character were remade by what those immigrants brought with them and what they created after they were here.

The immigrants came mostly in two great waves, first from northern Europe—places like Ireland, Germany, Scandinavia—and then from southern and eastern Europe—Italy, Russia—but they also came from China and Japan and Mexico and Canada and almost everywhere else on earth. They shaped the nation with their collective independent, pioneering spirit, for it was not easy or inexpensive to abandon all you knew and travel around the globe to a new land, and those who made the journey tended to be stubborn and ambitious. They also shaped the nation with the fortitude they showed after they got here, for almost all of them had to strive long and hard to rise to prosperity, and most of them faced discrimination and disdain from the moment they arrived. As we struggle with the burdens we sometimes feel placed on us by our latest immigrants­—especially illegal ones—it can be heartening to remember what struggles there were before, in a time when there were virtually no limits on who could come to America or what hardships they could be forced to put up with.

Around the same time Ehrich Weisz arrived in the U.S., Luigi Giannini traveled from Italy to try to succeed as a farmer in the lush lands of California, but he wasn’t there long before he was murdered by one of his farmworkers over two dollars in wages. His son, Amadeo, dropped out of school in the eighth grade and went to work for a wholesale produce business. Amadeo proved so good at buying and selling that by 1904 he was able to open a little bank in a former saloon in San Francisco’s Italian neighborhood to serve immigrants who most banks wanted nothing to do with. He called it the Bank of Italy, and under his guidance it opened branches even through the earthquake of 1906 and the Panic of 1907. In the 1920s, he changed its name from the Bank of Italy to the Bank of America. It remains today one of the nation’s great financial institutions.

There are countless stories like those, because to be an immigrant at all you almost had to have unusual resourcefulness, imagination, and drive. The first big group to arrive was the Irish in the late 1840s. More than two million of them—around a quarter of Ireland’s population—sailed to the United States to escape mass starvation caused by the potato disease known as the “blight.” They were so hated by some Americans that they weren’t even considered white—a cartoon in Harper’s Weekly in 1876 showed a black man and a just-as-black Irishman above the caption “The Ignorant Vote.” Yet by the 1880s they were the master politicians of many of the cities in which they dwelled. More than five million Germans came to America during the century of immigration as well; today, Germany remains Americans’ top place of ancestral origin—above England or anywhere else. Germans and Scandinavians tended to move to rural areas in the Midwest, establishing farming communities. By 1890, the United States was a nation of lager beer drinkers and lovers of German food, and there were 800 German-language newspapers across the land. Most large U.S. cities fostered sizable German-speaking communities until the start of World War I, when all things German suddenly came to be considered unpatriotic.

Chinese began arriving on the West Coast in the late 1840s, imported to do grueling labor such as building railroads and mining, work not many whites wanted to do. Often they were the bulk of the population in the mining camps of the West, and in San Francisco in 1870 there were estimated to be two white people and one Chinese person for every job. The Chinese were the victims of especially virulent discrimination, seen as an inferior race that put “real” Americans out of work. In 1882 a law was passed that almost completely stopped them from coming to America. It was the first time there was even a concept that immigration could be illegal. Until then the door had been open to everybody.

The second big wave of immigration began in the 1880s. More than 4 million people left Italy for the United States between 1880 and 1920, and about as many Jews came from eastern Europe, especially Poland and Russia—about a third of all the Jews in those countries. The Jews were driven from their homelands principally by religious persecution, the Italians by unending grinding poverty. At the beginning, both groups stayed mainly in the cities of the eastern seaboard, packed together in crowded, desperately poor neighborhoods. In 1910 there were 500,000 Jews living on the Lower East Side in New York City, which one person called “the filthiest place in the Western Continent.” By 1920 New York was home to 400,000 Italian immigrants.

Jews found that they hadn’t escaped anti-Semitism at all by coming to the New World, although it almost never threatened their lives as it had in the Old. As for Italians, The New York Times once ran an editorial that said, “Our own rattlesnakes are as good citizens as they.” As the twentieth century dawned and poor new arrivals from abroad made up more and more of the population of America’s biggest cities, pressure grew to put limits on immigration.

Where were the laws to control the great influx? They barely existed. In 1790, Congress ruled that any “free white persons” who were in the country for two years could become citizens. In 1868, after the Civil War, the Fourteenth Amendment affirmed that anyone born in the U.S. was a citizen, protecting not only former slaves but every child of an immigrant. In 1882, Congress passed the Chinese Exclusion Act, putting an end to immigration from China. In 1892, the federal government opened Ellis Island in New York Harbor, but it turned away only “idiots, insane persons, paupers,” criminals, and people “suffering from a loathsome or contagious disease.” In 1907, President Theodore Roosevelt persuaded Congress to establish a commission to study immigration, and the commission delivered a report that stated that recent arrivals, especially Italians and Jews, were “far less intelligent” than earlier ones with an “absence of family life.” That gravely unfair assessment led to the passage of laws in the 1920s that almost completely stopped immigration. The century of immigration ended. Large numbers of new Americans wouldn’t begin to enter again until President Lyndon Johnson—standing beneath the Statue of Liberty—signed a new law reopening the nation’s doors in 1965.

All through the century of immigration there were fears that the hordes of newcomers from exotic lands would never assimilate into American society. But of course they did—and in so doing they enriched American society immeasurably. To state just the most obvious, imagine Boston without Irish politicians or New Orleans without Cajun (originally French-Canadian) food and music or an entertainment world without Jewish humor or San Francisco without Chinatown. Still far worse, imagine the land without all the people who brought those things. You can’t, because they—and their ideas and hopes and dreams and all of their descendants—became America. America became them. They are no less us than are the original settlers who trekked over the land bridge from Asia to Alaska tens of thousands of years ago, no less us than the first few English who settled a few scattered spots on the coastline or the millions of Africans who were taken across the ocean in chains. It is a cliché, but it is a true one, that America is defined by people who came from elsewhere, what they brought with them, and the new things they created after they got here.

It is encouraging to remember as we face the immigration struggles of the present moment that not only have we seen it all before, but that the history of immigration in America is almost all a story of heroic, difficult struggle—and that it is finally a story of triumph.

We the People Make This a Great Country The Saturday Evening Post

That man’s name was Henry Ford, and his first automobile ride launched a career that rivaled Edison’s own. The nation’s history is peppered with stories like that, of men and women swept up in inventing. Consider what America has produced ahead of other nations: high-pressure steam engines, continent-spanning railroads, the light bulb, the telephone, the motion picture, the airplane, FM radio, television, the atom bomb, the transistor, the personal computer, the Internet, a host of modern medicines and imaging machines, the credit card, the cell phone … and that list barely scratches the surface.

Why has this nation spawned such an unending, unparalleled outpouring of inventive creativity? There are two basic reasons: the people and the place.

The people because America has been a land of strivers, explorers, and dreamers since the first settlers landed on the East Coast — or even since the first intrepid Siberians walked over the long-gone land bridge to Alaska and began spreading south to Patagonia. This nation has been populated by people who were dissatisfied enough to turn their lives upside down in striking out for something new. That spirit became part of our national DNA.

You see it in an inventor such as Robert Fulton. Fulton, born into rural poverty in 18th century Pennsylvania, dreamed of getting rich as a portrait painter. He managed to get himself to London to study with some of the best artists living. After a few years, he knew he didn’t have the talent to become a great painter. He decided to become an inventor instead. He spent years trying to become an expert in canals, the high-tech fad of the moment. He got nowhere with that, either. Not one to give up, he then had the crazy idea of inventing the submarine and submarine warfare. He got both the British and French governments behind him at different times, convincing each he could enable it to defeat the other. Eventual failure again. Still he refused to accept a life without extraordinary accomplishment. He happened to meet the new American envoy to Paris, who had been granted a government monopoly to run steamboats on the Hudson River — if anyone could invent a steamboat that actually worked. Fulton said, “Of course, I’m your man.” And in 1807, he piloted the world’s first commercially successful steamboat and ushered in a new age.

October 1911, Dare County, North Carolina, USA. Orville Wright flies a glider over Kill Devil Hills. Image by Bettmann/CORBIS.

Not just the people of the land, but the land itself, too, had much to do with the firing of the nation’s creative imagination. When the Revolutionary War ended, the victorious new nation was impoverished and deeply indebted. England had used its colony as a source of raw materials and had discouraged manufacturing or any other kind of self-sufficiency. The population was thinly scattered across millions of acres loaded with potential materials of wealth — timber, coal, the power of falling water, undeveloped farmlands. There were, in short, too few people to make the most of the riches of the land, and none of those people were inclined to think of themselves as mere laborers. The situation was utterly unlike that in Europe, which was jammed with people able to do the work of making the most of limited resources.

America desperately needed labor-saving technology. It needed novel ways to multiply the capabilities of its sparse population. So the American people bent their will to accomplish that. In the first decades of the republic, a would-be schoolteacher from New England named Eli Whitney developed a simple engine, or “gin,” that made it possible for cotton to be produced in massive amounts across the deep South. After that he went on to pioneer the use of interchangeable parts that would give rise to the concept of mass production. A self-taught millwright in the mid-Atlantic named Oliver Evans dreamed up and built the first automated factory that could turn grain into flour without human intervention. A 21-year-old worker at one of England’s first mechanized textile mills slipped out of that country with all the details of the technology in his head — because it was kept a secret that couldn’t legally be shared with other nations — and started the first of the great cotton mills of New England.

The nation’s creative fecundity has not let up since. In fact, it has multiplied over time. By 1911, 1 million U.S. patents had been granted. By 1991, 5 million had. In 2006, patent number 7 million was issued.

It is part of the genius of America that the Framers authorized a patent system in the U.S. Constitution, as a necessary booster of creativity. A patent is basically a very simple thing, a government grant of exclusive rights to an invention in return for making the workings of that invention public knowledge. The exclusivity lasts for 20 years in order to give the inventor time to profit from his innovation. The publicizing of the details expands knowledge and thus promotes invention by others. Abraham Lincoln — the only U.S. president to hold a patent, for a device for getting boats over sandbars — once said, with characteristic eloquence, “The patent system added the fuel of interest to the fire of genius.”

In the early days of the patent system, every application had to be accompanied by a model of the invention. That would be impossible nowadays, for there have come to be patents for nonmechanical things unimaginable in the first days of the republic — chemical processes, algorithms, software, even genes.

Can such an explosion of creativity continue, and continue to grow? No one can divine the future, but one thing is certain: The world is so complicated now, and the level on which most true technical innovation occurs is so advanced that the American imagination cannot maintain its productivity unless the nation has the best educational system possible. How important is the educational system? Even a century and a quarter ago, in the age of purely mechanical innovation, it could be crucial.
Consider the story of two young boys in Iowa in 1878.Their father was a minister, who, on a church trip, came across a toy that consisted of a stick with a kind of propeller at the top. You wrapped a rubber band around the stick, tightened it, and when you released it, the stick spun and flew up in the air. He brought the toy home to his two boys, who were 7 and 11. They were fascinated by it, and they started making copies of it.

One day Miss Ida Palmer, their teacher at the Jefferson School in Cedar Rapids, caught one of them at his desk fiddling with two pieces of wood. She asked him what he was doing. He said he was putting together the parts of a flying machine, and he added, to her disbelief, that someday he wanted to make a larger version that would make it possible for him and his brother to fly.

Miss Palmer reprimanded the boy, but she recognized something in his wild imagination — it contained the seed of something precious. She did not take away his toy. His enthusiasm was not dampened. And he later remembered, “We built a number of copies of this toy, which flew successfully. But when we undertook to build the toy on a much larger scale, it failed to work so well.”

The boys finally did make a bigger version that worked. The brother who was caught at school was Orville Wright. The other one was Wilbur Wright.

Frederick E. Allen is the former editor of American Heritage magazine and current leadership editor of Forbes.

The Post Celebrates American Ingenuity The Saturday Evening Post