The Robber Barons and the Birth of Industrial America
To understand how America transformed from a farming nation into an industrial powerhouse, you need to understand when the country actually built its industrial wealth. During the Civil War, America was still mostly farmers, small merchants, and regional businesses. The real transformation happened afterward.
The serious money got made between 1870 and 1900—the era of the so-called robber barons. Rockefeller, Carnegie, and their ilk built vast fortunes in oil, steel, and railroads, but crushed unions and dodged taxes, using monopoly power to squeeze workers and rivals.
By 1890, the United States had become the world's largest industrial economy. For the first time in American history, there was a genuine plutocrat class—men who controlled entire industries and accumulated fortunes that dwarfed anything the founding fathers could have conceived.
These titans established a template that endures today: build your fortune, dodge taxes and labor costs, then polish your legacy with charitable endowments after you're dead. Carnegie libraries and Rockefeller foundations make great PR, but they preferred philanthropy to taxation.
WWI: The Beginning of High Tax Brackets for the Wealthy
When World War I erupted in Europe, America finally had the wealth to tax seriously. The modern federal income tax had just been established in 1913 with the 16th Amendment, starting with laughably low rates—just 1 percent on incomes over $3,000, with a top rate of 7 percent.
Then America entered the war in 1917, and Treasury Secretary William McAdoo faced a problem no previous Treasury secretary had confronted: how to fund the most expensive war in American history.
McAdoo's solution was breathtaking in its audacity. By 1918, he'd jacked the top income tax rate to 77 percent. The robber baron fortunes that had been accumulating for nearly fifty years suddenly found themselves funding Uncle Sam's war machine. Rockefeller, Carnegie, and their industrial heirs discovered that their monopoly profits came with a hefty surcharge when the nation needed money.
It's a romantic fairy tale that America once believed in shared sacrifice. We love telling ourselves that during the Civil War, World War I, and World War II, the wealthy patriotically opened their wallets and paid higher taxes out of moral duty and love of country. There's a grain of truth in that story, but it conveniently ignores the harder reality: before 1971, the bastards didn't have a choice.
Gold: The Adult in the Room
Until Nixon pulled his famous sleight of hand in 1971, every dollar was backed by gold at $35 an ounce. Under Bretton Woods, those green pieces of paper were actual claims on real bullion sitting in government vaults. That arrangement had one beautiful feature: it forced grown-ups to act like grown-ups.
If Washington printed too many dollars or went on a borrowing bender, foreign governments could show up at the Treasury window like impatient creditors and demand their gold. And guess what? The vaults would start looking awfully empty, awfully fast.
That's the real reason taxes shot up during wars. It wasn't noble virtue—it was cold, hard math. Roosevelt didn't jack the top rate to 94 percent in World War II because he was feeling generous toward the working class. He did it because gold wouldn't let him write rubber checks to fund the war machine.
Every Treasury secretary from Salmon Chase to William McAdoo said the same thing: you can't fight wars "on credit" without screwing over future generations and turning your currency into Monopoly money. The wealthy squealed about taxes then just as loudly as they do now. The difference? Gold kept them honest.
Kennedy's Moment of Optimism
By the early 1960s, with no world war grinding away at the budget, JFK felt confident enough to cut tax rates. He proposed slashing the top rate from 91 percent to 70 percent—the economy needed juice, peace was holding, and hey—why not let people keep more of their money?
For a brief, shining moment, it worked. Growth picked up. The books looked balanced. Nobody in Washington had the imagination to foresee that a piddling regional conflict in Southeast Asia would metastasize into the costliest war America had fought since Hitler.
LBJ: The Master of Wishful Thinking
Then came Lyndon Johnson, a man who never met a problem he couldn't solve by throwing money at it—preferably someone else's money. Determined to escalate Vietnam while building his Great Society at home, LBJ figured he could have his cake and eat it too. The war would be quick, cheap, and surgical. In 1966, he was still insisting Vietnam would be "short and limited." Guns and butter? No problem!
Oops.
By 1968, Vietnam was devouring $30 billion annually—real money back then. Johnson finally, grudgingly, pushed through a 10 percent surtax. But it was temporary, too little, and way too late. Deficits exploded, inflation crept up, and America's gold reserves started draining like a bathtub with the plug pulled.
De Gaulle Crashes the Party
The world wasn't stupid. Charles de Gaulle—never one to mince words—accused America of abusing its "exorbitant privilege" as the holder of the world's reserve currency, forcing other countries to finance American deficits. He had a point: America was writing IOUs backed by increasingly theoretical gold reserves.
So in 1965, the French began systematically converting their dollars to gold, with other countries following suit. They retrieved their bullion quietly but deliberately, like financial repo men demanding payment on America's IOUs. America's gold stockpile fell from over 20,000 tons after World War II to under 9,000 tons by 1971.
The message couldn't have been clearer: America could keep fighting Vietnam, cutting taxes, and spending like a drunken congressman, but only if it was willing to either raise permanent revenue or watch its gold disappear into foreign vaults.
Nixon's Brilliant Scam
Rather than do the hard work of raising taxes or admitting America had limits, Richard Nixon pulled off one of history's greatest financial con jobs. On August 15, 1971, he slammed the gold window shut, calling it a "temporary" measure. Fifty-four years later, it's still closed. No more converting dollars to bullion. From that day forward, American money became what economists call "fiat currency"—backed by nothing more than politicians' promises and the world's collective willingness to believe in fairy tales.
Ladies and gentlemen, meet America's national credit card.
No more asking rich people to pay up when wars started. No more watching gold drain from Fort Knox when deficits got too big. Politicians had discovered the holy grail: a way to fund wars, tax cuts, and social programs without sending voters an actual bill.
Reagan Perfects the Art
Ronald Reagan showed everyone how to max out the new credit card. He slashed the top tax rate from 70 percent to 28 percent while launching the largest peacetime military buildup in American history. Previous presidents had sold wars by raising taxes. Reagan sold one by cutting them.
Debt nearly tripled during his presidency. His own budget director, David Stockman, later admitted the whole thing was built on "rosy scenarios"—accounting fantasies designed to hide the massive deficits. But voters didn't feel any immediate pain. Inflation was tame, foreigners kept lending, and the plastic seemed to have no limit.
Reagan didn't invent deficit spending, but he turned it into performance art.
The Era of "Free" Wars
Since Reagan, every president has perfected the swipe:
• George W. Bush pulled off the impossible: tax cuts during two wars—unprecedented in scale during major modern wars.
• Barack Obama fought the Great Recession by maxing out the card.
• Donald Trump cut taxes again while boosting military spending, because why choose?
• Joe Biden financed pandemic relief and Ukraine aid the same way every president since Nixon has financed everything: somebody else's problem.
America has been fighting non-stop wars since Vietnam. Unlike every previous era in American history, not one has come with higher taxes on the wealthy. Every single conflict has been swiped onto the national credit card, costs hidden through the magic of borrowing and money-printing.
The Bill Collector Cometh
Surprise! The bill is starting to show up.
Debt has climbed past 120 percent of GDP—World War II levels, but without the excuse of actually saving democracy from fascists. This time there's no 94 percent top tax rate to pay it down, no shared national purpose, and no end in sight. Interest payments are eating an ever-larger chunk of the federal budget like a financial cancer.
For fifty years, politicians promised Americans the ultimate something-for-nothing deal: wars without sacrifice, programs without payment, tax cuts without consequences. That magical promise was made possible by fiat currency. But even magic credit cards have minimum payments, and ours is getting harder to make every month.
The Truth About "Shared Sacrifice"
Here's the uncomfortable truth: America didn't abandon some noble tradition of shared sacrifice. The rich didn't suddenly lose their patriotic virtue in 1971. They had always hated paying taxes. They just used to be forced to.
When Nixon ended gold convertibility, that forcing mechanism disappeared. Washington discovered it could fight wars and cut taxes simultaneously, hiding the real costs through deficits. Once voters stopped feeling the pain immediately, fiscal irresponsibility became the new normal.
The Unequal Burden That Worked
Here's the uncomfortable truth that nobody wants to discuss: throughout American history, the wealthy carried a disproportionate share of wartime costs, and that's probably the only way back to fiscal sanity.
There's a simple logic to this beyond just arithmetic. The wealthy benefit disproportionately from what the country provides—the legal system that enforces contracts, the military that protects global trade routes, the infrastructure that moves their goods, the education system that trains their workers. When those systems need defending or expanding, it makes sense that those who profit most from them pay the most to maintain them.
From the Civil War through World War II, every major conflict saw the rich pay vastly higher tax rates than everyone else. In WWII, Roosevelt's top marginal tax rate reached 94 percent. It wasn't fair in some abstract sense, but it worked both mathematically and logically—wars got funded without destroying the currency, and those who had the most to protect paid the most to protect it.
That system broke down starting with Lyndon Johnson's Vietnam escalation. For the first time, America tried to fight a major war without dramatically raising taxes on the wealthy. Every conflict since has followed the same pattern: spread the costs across decades through borrowing rather than concentrating them on the people who can actually afford to pay.
The wealthy have never wanted to pay those rates—not in 1918, not in 1943, and not now. But the gold standard forced them to. Remove that constraint, and you get fifty years of "free" wars funded by future generations.
Getting back to balanced books probably means getting back to seriously unequal tax burdens during conflicts. The rich won't like it any more than their great-grandfathers did. But somebody has to pay for wars, and it's either them now or everybody later through inflation and debt service.
Warren Buffett Gets It
Even today's wealthiest Americans understand this basic logic, though most won't say it publicly. Warren Buffett is the exception.
Buffett admits the wealthy are undertaxed, famously noting he pays a lower rate than his secretary—a system he calls fundamentally unfair because "Debbie works just as hard as I do and she pays twice the rate I do."
But Buffett goes deeper than just tax rates. He understands that his wealth exists only because of American systems and institutions. As he explained: "I happen to have a talent for allocating capital. But my ability to use that talent is completely dependent on the society I was born into. If I'd been born into a tribe of hunters, this talent of mine would be pretty worthless... But I was lucky enough to be born into a time and place where society values my talent, and gave me a good education to develop that talent, and set up the laws and the financial system to let me do what I love doing—and make a lot of money doing it."
In 2024, Buffett's Berkshire Hathaway paid $26.8 billion in taxes—"the largest-ever tax payment made to the U.S. government." His response? "Thank you, Uncle Sam," acknowledging that Berkshire's success "couldn't have happened in any other country."
Buffett even ran the numbers: if America's top 800 companies paid taxes at the same rate as Berkshire, "no other person in the United States would have had to pay a dime of federal taxes, whether income taxes, no Social Security taxes, no estate taxes."
The Oracle of Omaha gets what the robber barons understood a century ago: if you benefit most from what the country provides, you should pay the most to maintain it. The only difference is that Buffett admits it voluntarily instead of waiting for gold convertibility to force his hand.
But Buffett is the exception. Most of today's wealthy have taken a different approach: they've used their campaign contributions and political influence to promote economic theories that justify keeping their taxes low. Supply-side economics, trickle-down theory, the Laffer Curve—these aren't neutral academic insights. They're intellectual cover stories funded by the same people who benefit from them.
When the wealthy can't rely on gold standard constraints to disappear, they create think tanks and fund economists to argue that high taxes on the rich somehow hurt everyone else. It's a more sophisticated version of what the robber barons tried with their bought politicians, but the goal is identical: avoid paying for the system that made you rich.
The results speak for themselves. For sixty years—from Vietnam to Ukraine—America's wealthy have successfully avoided the kind of wartime tax burdens their predecessors carried. Sixty years of "free" wars funded by borrowing instead of the people who benefit most from American power and prosperity.
The Credit Card Society
Most Americans understand Visa bills better than monetary policy, which is why this metaphor works. Before 1971, we were a cash society: pay as you go, or run out of gold. After 1971, we became a credit society: swipe now, figure it out later.
Vietnam blew the hole in our fiscal discipline. Nixon opened the escape hatch. Reagan normalized the endless swipe. And for half a century, America has been running one continuous tab, soothed by the pleasant fiction that somehow, someday, someone else will pick up the check.
But here's the thing about credit cards that every American knows but every politician pretends to forget: eventually, the bill comes due. And when it does, the minimum payment isn't optional. Inflation starts eating savings, interest payments crowd out everything else in the budget, and the political system locks up when voters realize somebody actually has to pay.
The only question left is who pays when the credit card's maxed—your kids, or the people who can actually afford it?