Viewpoint: Going Backwards


Back in 1972, a government pamphlet boasted that "thousands of mentally retarded men and women have been placed in federal jobs during the last 8½ years." By now, the figure must be in the hundreds of thousands, and evidently includes a few Cabinet heads. The consequences have not been encouraging.

We have employment problems, so the administration proposes to increase the costs of employment by boosting employers' payroll taxes.

A lot of inexperienced teenagers can't find work at the existing minimum wage, so the Congress proposes to make it illegal to offer them jobs at less than $2.65 an hour next year, $3.40 by 1981.

Welfare costs are out of control, so the administration proposes to reform the system by increasing its cost.

The chronic scarcity of food, a fashionable topic a couple of years ago, has turned into a glut. The administration now proposes to alleviate hunger by restricting grain production and raising farm and dairy prices.

Men are dropping out of the labor force like flies, neither working nor seeking work, and the average age of retirement in big industries is down to about 55. So Congress worries about raising the mandatory retirement age, and flirts with denying Social Security benefits until age 68.

After people have paid their federal taxes, they don't have anything left to finance essential services that are monopolized by local governments. So the feds plan to help the cities by taxing their residents a bit more in order to send part of it back, with strings attached, as federal "aid."

Federally financed spending on medical care has driven prices sky high and resulted in wholesale corruption. The administration's solution is to complete the nationalization of medical care, turning the whole industry into one big Medicaid scandal.

High taxes on income from investments have discouraged productive investment. The administration proposes to fix this problem by taxing capital gains at income tax rates, without full deduction for capital losses, even when those gains simply reflect inflation. The main concern of the leaked tax reform bill seems to be that somebody might make a buck from our soaring stock market.

Whimsical changes in the basic regulatory rules of the game have paralyzed long-term business planning and investment. "At first glance," says Labor Secretary Ray Marshall, "that seemed to make sense.…But then I remembered that business leaders were supposed to be entrepreneurs. Our entire economic system is premised on rewarding business for taking risks." When the risks exceed the rewards, however, an economy stops. When Idi Amin took over Uganda, rational entrepreneurship did not demand that the Asian merchants build more stores in that country.

US exports are becoming costly relative to imports because our inflation is worse than that of our major trading partners. Our trade deficit grows, the and we blame Germany and Japan for not adopting good old Anglo-American inflationary policies. Moves toward protectionism have already begun (sugar, shoes, television), although the end result can only be a shrinkage of world markets and a reduction in real income at home and abroad.

Competition for lendable funds has been driving interest rates up, despite blatantly inflationary increases in the money supply. So Lester Thurow, Walter Heller and the Joint Economic Committee bemoan the harsh reality that the growth of money can't seem to stay ahead of the related growth in inflation. "This is not to suggest that current rates of inflation should be validated," says Heller, but it does mean exactly that. Meanwhile, Congress and the Administration are tumbling all over themselves in an effort to increase the gargantuan Treasury deficit, and thereby precipitate a credit crunch for the private sector. This is called "fiscal stimulus."

Energy consumption continues to outrun domestic production, causing increased reliance on costly imports. The official reaction is to tax domestic gas and oil production, subsidize oil imports, tax or limit certain energy users, withhold energy exploration on federal land, and keep consumer prices down and taxes up. This is called a conservation program.

Viewed separately or together, there is an eerie unreality in all of this. There is no visible link between perceived problems and proposed solutions. Most of Washington appears to be out of touch with what is going on. The world is on fire, and the administration is sprinkling the sparks with moonshine.