Articles From the March 1995 Unification News


Socialism by Amateurs

by Ralph R. Reiland

In his State of the Union Message in 1963, President John F. Kennedy said:

To achieve these greater gains, one step above all, is essential-the enactment this year of a substantial reduction and revision in Federal income taxes ... Our obsolete tax system exerts too heavy a drag on private purchasing power, profits, and employment. Designed to check inflation in earlier years, it now checks growth instead. It discourages extra effort and risk. It distorts the use of resources. It invites recurrent recessions, depresses our Federal revenues, and causes chronic budget deficits ... This program, by increasing the amount of our national income, will in time result in still higher Federal revenues ... It will, in addition, encourage the initiative and risk-taking on which our free system depends-induce more investment, production, and capacity use-help provide the 2 million new jobs we need every year-and reinforce the American principle of additional reward for additional effort.

Kennedy and Reagan both favored tax cuts on the top income earners and their policies produced the two longest economic expansions in our history. In contrast, Clinton proposes to hit the investing sector with new mandates and the largest tax increase in history. While Kennedy sought to "reinforce the American principle of additional reward for additional effort," Clinton prefers the bankrupt old socialist principle of punishing the successful.

With the attempt by this administration to erase the real history of the 1980s, I feel like I just woke up in Leningrad and I'm forbidden to talk to anyone about the good times we had in St. Petersburg.

Robert Reich claims that "The investments of wealthier Americans no longer trickle down to the rest of the American people."

In fact, in the 1980s, the Reagan tax cuts were followed by a 76 percent jump in new business investment in real dollars, and that trickled down to create 19 million new jobs and the lowest unemployment rate in 16 years. The economic growth that flowed from lower taxes trickled down to produce $1.1 trillion in additional federal tax revenues in the 1980s. Contrary to the story presented by the media loudspeakers, that additional tax revenue resulting from lower tax rates contributed to the successful reduction of the federal deficit from 6.3 percent of GDP in 1983 to 2.9 percent in 1989.

While the class warfare rhetoric of the Clinton administration says those at the top "made out like bandits" in the last 12 years at the expense of everyone else, the facts show the benefits of the economic boom of the 1980s weren't bottled up by "the elite few." Real per capita disposable income rose by 19 percent in the 1980s, nearly double the rate of the 1970s, and the real income of households in every quintile group increased every year from 1983 through 1990.

In the poorest quintile, the real income of families increased by 12 percent in the 1980s, reversing that bottom quintile's 17 percent slide in real income between 1979 and 1983 that trickled down from the Carter stagflation of rising joblessness and higher prices.

With blacks and women, the Clintonites try to paint the 1980s as a bonanza for only overprivileged white male Republicans, with Willie Horton and Anita Hill as the star victims. In fact, the 1980s was a decade of unprecedented upward mobility for blacks and women. The percentage of black families earning over $50,000 in real dollars doubled from seven percent to 14 percent, the jobless rate for black teenagers fell by 21 percent and black employment in managerial and professional jobs expanded by a third.

The median weekly earning of female workers grew eight percent faster than male earnings, the number of female lawyers and doctors increased by 164 percent and 109 percent respectively, and women entrepreneurs ended the decade by employing more people than all of the Fortune 500 companies combined.

Overall, the 1980s was a decade when the poor got richer at a faster rate than anyone else. An Urban Institute study by Isabel Sawhill and Mark Condon shows real earnings increased only five percent by 1986 for those who started in the top quintile in 1977, while for those who were in the poorest fifth of the population in 1977, real earnings increased an average of 77 percent by 1986.

The Clintonites bury that success story of upward mobility of all the classes in the 1980s by focusing on the share of national income in the bottom quintile from one decade to the next, ignoring that it's a constantly changing group of people on that bottom rung of the income ladder. Treasury Department economists report that 86 percent of the tax filers in the bottom quintile in 1980 had moved to higher quintiles by 1988, and 16 percent had moved all the way to the top quintile. The leftists never talk about that. They hate the fact that Horatio Alger isn't a myth.

This administration wants us to believe that the private sector is severely flawed and unfair, and that only more government control and higher taxes can save us. We're supposed to believe that the record- breaking investment-led boom of the 1980s just didn't happen. Labor Secretary Robert Reich says, "The success of American capitalism no longer depends on the private investments of highly motivated American capitalists." Instead, our success is now to be dependent on the central planning of the social engineers in the Oval Office.

Winston Churchill said, "Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few see it as a sturdy horse pulling the wagon." This administration doesn't even see the horse. They can't see why we need private entrepreneurs to innovate and risk and invest when the college policy wonks in the White House can do everything better.

Before too much more damage is done, it's time for a reality check. Even the Germans couldn't make socialism work, so let's not try it here with some amateurs from Harvard and Woodstock.

Ralph Reiland, assistant professor of economics at Robert Morris College in Pittsburgh, writes for The Freeman, the monthly journal of the Foundation for Economic Education, Irvington-on-Hudson, New York.


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