Beyond Peace (29 page)

These spasms of outrage generally come from the bureaucrats, interest groups, and other organizations that receive the taxpayer dollars the federal government dispenses. All are masters at bringing political pressure to bear on the most neuralgic spot in Congress and the media. President Reagan, one of the strongest Presidents of the post–Cold War era, learned this lesson early in his first term. While in office he created the Strategic Defense Initiative, armed the Nicaraguan contras, and deployed intermediate-range nuclear missiles in Europe, all over the shrill objections of his critics. But when the giant teachers' unions got wind of his plan to abolish a relatively new megabureaucracy, the Department of Education, the sworn enemy of the Evil Empire had finally met his match and had to cry uncle.

The liberals' favorite programs are the hardest to cut. There are two for which I feel a particularly acute sense of responsibility. The first is the subsidies to public television and the national arts and humanities endowments. Their budgets increased at a healthy pace during my administration, despite my reservations, and by 1973 they were receiving a total of $129 million. After
twenty years, ten of which our country spent agonizing over the deficit, their budgets have quintupled, to $640 million. If all three programs were terminated tomorrow and the unspent funds were returned to the federal treasury, Americans' quality of life would not be diminished by one iota. If enough people wanted to watch
Masterpiece Theater,
or performance art in which people do bizarre things to their bodies with vegetables, the marketplace, including the huge private foundations that support the arts, would find a way to make this possible. And yet in the current atmosphere, even if the President wanted to eliminate these programs, he could no more do so than he could fly to Mars, because they are the darlings of the liberal establishment.

Even harder to eliminate or even slow will be those programs where the tendencies of bureaucracies to grow and grow dovetail with the profound antiestablishment, antibusiness inclinations of the post-Vietnam generation of federal officials and special-interest lobbyists. The most obvious example is the way environmental programs have run amok since I created the Environmental Protection Agency and signed into law the Endangered Species Act.

I consider myself an environmentalist. No rational person can quarrel with Churchill's observation “I see little glory in an empire which can rule the waves and be unable to flush its sewers.” When we established the EPA, our goal was to find a rational balance between the imperative of protecting the environment and the imperative of economic growth. Since we recognized that most well-meaning businesspeople wanted clean air and water for the sake of their children and grandchildren as urgently as did the protesters marching in the streets, we envisioned a cooperative relationship between business and the new agency, with punitive measures applied only in cases of abuse.

But as so often happens with government programs, the pendulum has swung too far. Measures designed to protect endangered species such as bears, wolves, and the bald eagle are
now being used to force Idaho farmers off their land for the sake of the thumbnail-size Bruneau Hot Springs snail and to block massive developments in recession-ravaged southern California to protect the Pacific pocket mouse. Similarly, the public has been bombarded so relentlessly by apocalyptic warnings from EPA bureaucrats and private organizations about global warming and the depletion of the ozone layer that few people realize that many respected authorities believe these concerns lack any scientific foundation. Nonetheless, automobile companies have been ordered to make mind-bogglingly expensive modifications in automobile design on the basis of flimsy evidence.

Government, as bidden by radical environmentalists, has also mounted an assault on the nuclear power industry. Environmentalists' opposition to nuclear power makes no sense. It is the most abundant, cheapest, and cleanest energy source. Instead of spewing toxins and soot into the environment, nuclear power plants are self-contained and self-cleaning. Technological advances have made nuclear energy efficient, safe, and environmentally sound. In the 1960s, when nuclear energy seemed to be a threat to the big oil companies, many left-wing leaders favored it. When it became part of what they sneeringly called “the establishment,” they turned against it. Government regulators became their willing accomplices in trying to hamstring an entire industry. In the 1970s and 1980s, nuclear power generating facilities were being opened at the rate of one every three months. In the 1990s, new nuclear power plants will open at the rate of one every thirty-nine months—and because of the closure of plants due to environmental and antinuclear hysteria, there will be a net gain of just one new plant by the turn of the century.

One reason for such excesses is that as new departments and offices “mature,” if that is the right word, they look for new domains to conquer, new areas into which to extend their authority. Another reason is that the inherently anticapitalist impulses of the Vietnam generation are finding a new outlet in environmentalism and throughout government. Many bureaucrats
come to their positions straight from graduate school and have no experience or interest in business. Employed in government agencies from city planning offices to powerful federal departments, they have been taught that the most noble calling of government is to monitor, license, inspect, regulate, and punish the private sector. A hundred and eleven years after the death of Marx, two years after the death of communism in Russia, a depressingly large number of intellectuals, journalists, and government officials, as a result of their flirtation with the left in the 1960s, are driven by the same hostility to capital that helped spark the greatest ideological excesses of our century.

We should also think twice about the impact our environmental correctness has on the developing world. Rich nations can afford stringent environmental controls. Poor nations cannot. When I first visited Bangkok in 1953, it was one of the world's most beautiful cities. The air was clean, but we could not drink the water. During my most recent visit in 1985, advances in technology had purified the water, but the air was contaminated by the smog of industrialization. All Thais would probably like cleaner air, and as their nation continues to prosper, most Thais, through their taxes, will pay for cleaner air. But few Thais would be willing to trade away their dramatically higher standard of living for it.

Nations that are on the brink of enormous economic growth should not be permitted to befoul the environment as devastatingly as the communists did in the former Soviet Union and Eastern Europe. But we should not impose such strict international controls that the growth that would benefit these nations' peoples and the rest of the world is stunted for the sake of the tender sensibilities of the purists at the Sierra Club. Some of the most extreme activists would rather keep people in the developing world squeaky-clean and close to Mother Nature than permit their nations to experience the kind of dramatic advancement through industrialization that will make them healthier and more prosperous, at the cost of some temporary damage to
the environment. Such thinking can make environmentalism a cruel doctrine.

In Japan, some believe government is excessively allied with business. In the United States, it is excessively hostile to it. Government slows economic growth both by overregulating business and by sapping its strength through the increased tax bite it applies as it grows inexorably. It is adding insult to injury, therefore, to attack the budget deficit by raising taxes without cutting the size of government. To renew America and prime it for a new era of expansion and prosperity, we must keep taxes as low as possible and ruthlessly probe every dusty corner of government at all levels and do away with programs that are not needed or that serve only to dampen growth.

We should address the deficit though domestic spending cuts, not tax increases. The American people are grossly overtaxed because their government spends too much on politically alluring domestic programs. In 1992, federal, state, and local taxes claimed almost 40 percent of the GNP, a proportion larger than at any time since World War II. The administration's ill-advised tax increase will make this proportion even larger. And it does not include the enormous tax increases that would be required to finance the administration's revolutionary health care plan.

Savings and investment are central to our ability to finance industrial expansion and productivity growth. Capital gains taxes are taxes on savings. Income and payroll taxes are taxes on production. All three reduce the ability of American companies to compete in world markets.

Compared with our competitors, we Americans consume too much of what we produce and save and invest too little. Experience shows that we get more of what we invest in, and less of what we tax. Sensible tax policies would therefore shift the balance toward taxing consumption more and production less. That is why a value-added tax would be preferable to income and payroll taxes.

In the last several tax debates, liberals in Congress skillfully managed to shift the focus of public discussion away from what is taxed and toward who is taxed. They defined this as “fairness,” with fairness, in turn, defined as redistributing income away from the more productive and toward the less productive. This was clever politics but disastrous economics. From the standpoint of promoting economic growth, the “who” is irrelevant; the “what” is central. The key aim of tax policy should be to raise the needed revenue with the least damage to the economy. What we have instead is a set of tax policies shaped not by the requirements of growth but by the temptations of demagoguery. When economic growth is spurred, all win; when growth is stunted, all lose.

The bottom line is that America cannot tax its way to prosperity; it cannot spend its way to prosperity; it can only grow its way to prosperity. If we want prosperity, we need to shape our policies to foster growth.

To paraphrase Mark Twain on composer Richard Wagner, capitalism works better than it sounds, while socialism sounds better than it works. Capitalism, unlike communism or other secular creeds, is not a religion. It is a morally neutral set of economic principles that makes wealth-creation likely and virtue possible, although not inevitable. Socialism and the grinding scarcity it produces are conducive neither to prosperity nor to virtue.

One of the most idealistic leaders I met on my trip to Asia forty years ago was Burma's Prime Minister U Nu, now a renowned Buddhist scholar. He proudly showed me charts listing the scores of new hospitals, schools, roads, and other public facilities he planned to build in his newly independent country. They would obviously cost billions of dollars. I asked him where he was going to get the money. He answered, with a gentle smile, “From the government.” As his guest, I did not have the heart to ask the obvious follow-up question: “Where is the government going to get the money?”

Government can spend only what people produce. People produce more when they work for themselves rather than for the government. Tragically, Burma has continued to travel down the socialist road to perpetual poverty. Because it is one of Asia's last holdouts against free-market policies, the Burmese people, whom Herbert Hoover once described to me as among the happiest in Asia, suffer one of the lowest per capita incomes in the world.

Now that the collapse of communism has vindicated American policies, we would make a tragic mistake if we repudiated the values of enlightened individualism that spurred our success. We must not stumble blindly into what Margaret Thatcher derisively called the “nanny state.” We should build on the many positive accomplishments of the 1980s and correct some of the decade's serious mistakes.

This means reining in domestic spending and regulation, which threatens the strength of a free economy. In order to do so, we must disabuse ourselves of the myth that much of federal domestic spending is uncontrollable. All spending, apart from interest on the debt, derives from laws that Congress enacted and that Congress can change. To argue that we cannot tamper with the spending formulas of so-called entitlement programs is to abandon any hope of bringing federal accounts into balance. Non-means-tested entitlements—payments to those who have the means to take care of their own needs—currently consume almost 40 percent of the federal budget, up from 29 percent in 1970. The figures will increase significantly during the Clinton administration, especially if his health care plan passes in anything resembling its current form. Any attempt to solve America's economic problems that does not stop the runaway growth of entitlement spending cannot succeed.

Bismarck is superficially remembered as the Iron Chancellor who laid the foundation for German aggression in World War I and World War II. Many are not aware that he was a progressive leader who made Germany the most advanced welfare
state in Europe during the nineteenth century. His huge government welfare program worked as long as it was kept under control. But recently the fabled German economic miracle has fallen on hard times. The usually highly efficient and competitive German industry found itself overtaxed and overregulated because of the increased costs of the welfare programs that were once a model for the world. Draconian cuts in wages and entitlements have become necessary. The lesson is clear. Government should provide a floor for those who are unable to support themselves. But that floor must not be so high that it reaches the ceiling and snuffs out the incentive of those who must produce the income to support the floor.

We are seeing the same syndrome in other European nations and in Japan. At a time when our major competitors are slimming down their governments so that their economies can run faster, we should not be fattening up our government, which will slow down our economy.

The litmus test applied to every federal program should be whether it advances freedom or restricts freedom. The 1994 debate over health care will be a crucial testing ground for our faith in freedom, which, if it means anything, must mean free markets and free choice. America's health care system does need improvement, but it does not need replacement. We set the standard of health care quality for the world. When someone who can afford the best needs an operation, where does he go to get it? To Canada or to other countries that have government health care programs? No. He goes to New York Hospital, the Mayo Clinic, Dr. DeBakey's clinic in Houston, or any one of a number of America's excellent privately operated hospitals. We also lead the world in medical research and development. We make health
care services available, one way or another, to virtually everyone, whether insured or not.