The Age of Clinton

By Llewellyn H. Rockwell, Jr.

Even before Bill Clinton was inaugurated, an ill wind blew in the land. Soldiers were turned into armed social workers, and old- line Keynesian economists came out of the closet for Clinton's Economic Summit.

Clinton may not be FDR with a sax, but his two-day meeting – paid for by the Democratic National Committee, showcased by the media, and attended by special interests as well as economists – showed that happy days are here again for big government.

Journalist Hobart Rowen swooned at Clinton's "amazing grasp of the complex problems facing the nation" and his "brilliant mind at work." Author Robert Kuttner gushed at "the president the teacher."

In fact, with its 329 babbling voices, 46% of them representing special interests, the summit was an awful spectacle. Those on the federal teat cried for more, and the economists urged Clinton to make these babies fat and happy.

All said we should spend billions more to "stimulate" the economy. But where will the Great Stimulator get the dough? Your paycheck and bank account, of course, as if you had any doubt. By the end of Clinton's term, we will see a $2 trillion federal budget, and tax collections at 50% of national income.

Once upon a time, the central message of economics was "work and save." Now, at least at the Arkansas gabfest, it's "you can have it all, courtesy of the feds."

Nobel laureate James Tobin argued that "the country needs some stimulus in the short run." But isn't it time we started worrying about the long run? Our children's well-being is far more important than the next election.

Clinton seemed impressed by the pleas of his friends in banking for "deregulation." William H. Brandon, president of the American Banking Association, promised to inject $86 billion into the economy, if bank examiners would just look the other way for a moment.

But if the goal is to dump new money into the economy, here's a shortcut. On January 20th, just after his inaugural parade, Clinton can stop off at the Bureau of Engraving and Printing and turn the presses on high. Then he can gather up the cash and throw it out the window of Air Force One as he flies across the country. That would provide a short-term stimulus too.

Yet such actions as printing money, injecting credit, or spending billions on construction boondoggles ("infrastructure") not only do not create prosperity now, they make us poorer in the dreaded long run. Real prosperity can only come from private savings and capital accumulation, whose enemy is Washington, D.C.

At the summit, Clinton made one announcement that went almost unnoted: the rules that have governed the budget process since Gramm-Rudman-Hollings will be scrapped. This weak 1985 law didn't reduce the deficit, but it did put a very slight restraint on increased spending. But no more.

Do we need more taxes and more spending? Big unions and government contractors, not to speak of liberal economists, say yes. We're all supposed to think that the government cut back during " 12 years of neglect," when spending almost tripled.

Instead of talking on C- SPAN, the economists who advised Clinton need to go back to school. There they can learn that everything has a cost, that demands are always unlimited, that resources are always scarce, that taxes affect incentives, that the price system allocates rationally, unlike central planners, and that special-interest government subverts the commonwealth.

Tyson Trouble

Even worse than Tobin is Laura D'Andrea Tyson, professor of economics at the U.C. Berkeley, and Bill Clinton's pick to head the Council of Economic Advisers. For she did much of her academic work on Eastern European socialism, and liked what she saw.

In her Economic Adjustment in Eastern Europe, prepared for the U.S. Air Force and published by the Rand Corporation in 1984, Tyson praises the economic performance of Rumanian communism, without a mention of the nightmare created by Nikolai Ceausescu. In fact, her description of the centralization process is so coldly naive that it could have come from a government handout.

After a "brief but abortive flirtation with some decentralizing economic reforms of the Hungarian variety," she writes, "Rumania embarked upon a major 'remobilization' effort" to increase "the already substantial investment program" and "renew pressure on all levels of the planning and enterprise hierarchy to achieve increased growth rates."

"The Rumanian leadership" was committed to "rapid economic growth, emphasizing industrialization, based on the rapid transfer of agricultural labor reserves to industry and on a major investment effort." Is "transfer" of "labor reserves" a euphemism for forced relocation and slave labor? We're never told, since to Tyson, the only question is, did the Rumanian "investment" plan 49 work"?

Yes, she says. Rumania achieved "dazzling growth rates in the 1970s," most impressive for an economy which, she freely admits, "conformed to the traditional Stalinist model."

In the 1980s, Rumania was also "remarkably successful" in imposing the "austerity measures that are required for rapid short-term improvements in the balance of payments." Indeed, "continued austerity measures may produce some efficiency gains" in the Rumanian economy.

Of course, "austerity" actually meant a palace for Ceausescu and his vampire-like family, while the Rumanian people got pathetically little food, heat, electricity, or medical care. Communist Rumania had one of the most brutally repressive regimes in this century, and its economic policies produced not "dazzling growth," but poverty and death. Yugoslavian "market socialism" was the subject of Tyson's doctoral dissertation, later published as The Yugoslav Economic System in the 1970s (University of California, Berkeley, 1980). The dictator Tito's policies were disastrous, and she is critical of them ... for including a smidgen of the market.

This mixture "failed to live up to expectations." Thank goodness that during the 1970s, Yugoslavia saw "renewed attention to democratic centralism and to limiting open dissent among party members," with a "recentralization of authority within the party" away from "republican party organizations."

"As a consequence of these changes," Tyson writes in an astounding passage, "by 1977 Tito could justifiably claim that the unity of our working people has never been greater than today."

Her last academic work on Eastern Europe was published in 1986, Power, Purpose, and Collective Choice: Economic Strategy in Socialist States, a volume she co-edited with Ellen Comisso (published by Cornell University Press). In it, she labels economic shortages in Eastern Europe as merely a "widespread perception," while praising these countries for being "willing and able to provide a socialist safety net."

Even after the fall of socialism, in her newspaper column she urged "massive investment efforts" in state-owned industries (July 1989). And in January 1990, she said that the "free market frenzy in the United States during the past decade" demonstrates why we should have "collective ownership of firms by groups of workers."

Tyson is also on record as favoring industrial policy (i.e., U.S. central planning), protectionism (artificial barriers to international trade), and more of our money for the central government ("we are not overtaxed. Quite the reverse"). She has even claimed as "elementary economic principle": "there is no relationship between the level of taxes a nation pays and its economic performance." That is, no matter how big a percentage of our incomes the government takes, it will have no effect on our incentive or ability to save and invest.

This is voodoo economics, or considering her interest in Rumania, Draculanomics, in which politicians and bureaucrats are allowed to drain away as much of our economic life blood as they see fit.

Aschauer's Crooked Curve

Tyson never learned the lesson of the 1989 revolution that discredited much of her academic work, and neither did Bates College professor and Clinton advisor David Aschauer.

Aschauer plots on a graph the growth in productivity (as measured by government) with the value (as measured by government) of publicly owned assets like highways, dams, and mass transit, i.e. infrastructure. Charting from the 1950s, he finds the two growth rates to be almost parallel. As government infrastructure spending increases, so does the economic growth rate.

This is a logical fallacy. Say, for example, the government spends $1 00 billion next year on dams, and, at the same time, the economy grows by $200 billion. Are we justified in assuming that one caused the other? Hardly.

Indeed, might there not be a reverse causation? Could government tax and spend more when the economy is booming than when it is in the doldrums? Or we could conclude that government spending during economic booms contributes to the economic busts that follow?

John Maynard Keynes made similar claims about government spending during World War II. He thought that public works had a stimulating effect in the short-run, and in the long run we're all dead."

The Soviets also took this idea seriously and spent enormous sums on public works. But like the Clintonites, they had it backwards. Prosperity needs an infrastructure, but it does no good to create the effect without paying attention to the cause.

The costs of the Aschauer Curve show up later, in higher deficits, a weakened structure of private property, and failed and costly government projects. The highest cost, however, is the loss of freedom caused by a steadily growing government sector. No curve can justify that.

The Clintonian Future

It's tough to get teary-eyed over George Bush, but we ought to be terrified of his replacement. There hasn't been this much celebrating on the Left since the Bolshevik revolution, and for good reason.

Here's why, based on Clinton's statements, his advisors' writings, and the Democrat platform: higher taxes on income, energy, cigarettes, liquor, wine, and beer. We will also get a value-added tax, a form of national sales tax popular with European socialists. The exemption from inheritance taxes will be lowered by two-thirds, making all but the smallest estates subject to heavy assessment. The luxury tax will be reimposed. And churches will be taxed, while gifts to them and all other charities will be taxable.

We will get increased spending on bank bailouts; the cities; AFDC; food stamps; and government "jobs".

The Americans with Disabilities Act will be enforced to the hilt, destroying many small businesses now on the brink of bankruptcy. An armed civil rights police will be created.

The justice Department's anti-trust division will be revivified, cracking down on successful firms that try to merge or expand their market share. The computer industry will be regulated, freezing innovation. The airline and trucking industries will be re-regulated. Unemployment benefits will be lengthened, further subsidizing non-work. And the minimum wage will be indexed to inflation, permanently shutting out the poorest and most marginal workers.

We will have fully socialized medicine and therefore rationed care. And we'll have hymns to euthanasia, and why terminal patients should do the government a favor and kill themselves.

A national curriculum and federalized teacher selection and student testing will abolish what little local autonomy is left. National sex and environmental "enrichment" will be imposed on the smallest school, but chastity and capitalism will not be considered enriching. Private schools will come under federal regulations, and Head Start, a failed babysitting service for welfare mothers, will receive a 300% increase.

Anti-human, pro-bug environmental controls will be ratcheted up every few months, and we will have federal recycling. We'll also get higher automobile fuel-economy standards (and therefore smaller, lighter, and more dangerous cars), more public transportation, restricted non- HOV commuting, and a war on styrofoam (psst, buddy, want a cheap, strong, insulating coffee cup?).

We'll see prohibitions on logging, federal permits for new factories, and bans on production to fight non-existent global warming and ozone depletion. (The earth isn't getting warmer, and ozone, which is scattered throughout the upper atmosphere, isn't even a "layer," let alone in danger.)

The feds will wage a war on middle-class gun ownership, and teenagers will be pressured, and then drafted, into "national service."

There will be an explosion in "childrens' rights" litigation, with parental authority replaced with bureaucratic power.

In military policy, we will see more welfare-warfare missions. We will send more cash to Russia, the UN, the International Monetary Fund, and the World Bank. Foreign trade will be hampered, especially imports of autos and computers.

Puerto Rico and New Columbia (formerly the District of Columbia) will be states 51 and 52, adding four left-liberal seats to the U.S. Senate. Welcome, for example, Senators Jesse Jackson and Marion Barry.

Will there be a reaction in academic and public life? One that leads to a sweeping away of the statism that engulfs us? That's the biggest fear the media and our government managers have. And it's up to us to make that fear a reality.