In 1960 and again in 1968, several friends of mine who were highly placed in the Nixon campaign told me, "Believe me, Dick Nixon is a libertarian." (Some of the more optimistic even said, "Dick is an anarchist.") "He told me so himself," they'd say. "He has to play a little politics now, but when he gets into office, then you'll see." We saw.
Now the old nonsense is back in force. Libertarians, hard-money buffs, economic conservatives, are hailing President Reagan for his "historic," "revolutionary" cuts in taxes and in the budget and for his full-scale commitment to deregulation and the free-market economy. Liberals, too, are joining the chorus—from the other direction, howling about the millions of poor who will be thrown into the streets and about Reagan taking us back into the 19th century.
All of this is hooey and hokum. There is no "Reagan New Deal," and nothing either historic or revolutionary is going on. The fact that a small handful of libertarians or quasi-libertarians have gotten middle-level jobs in the administration means nothing except that a different cast of characters is fattening at the public trough and that their post-Washington careers will receive a substantial financial boost. The major point is that nothing is really going on. There are no budget cuts; there is no tax cut. The government deficit continues to be huge; the disastrous inflationary monetary policy continues in place.
Take the extraordinarily hyped "budget cuts." When President Eisenhower took office, he was justly denounced by the quasi-libertarian "Old Right" of the day for consolidating and cementing the New Deal instead of abolishing it. And yet, Eisenhower, in his first fiscal year in office, cut the budget—really cut it that is, by 8.7 percent. Not fantastic, surely, but at least a modest first step toward rolling back the federal government. Reagan, on the other hand, with enormous fanfare about a "revolution" in the direction of minimal government, is proposing to increase the federal budget next year by 6.1 percent. This is a cut?
The "cut" is only in the rate of increase of the federal budget proposed by President Carter. This is not in any sense a genuine budget cut. Furthermore, even the handful of programs that are really cut are not eliminated; not a single agency is abolished, not even the Council on Wage and Price Stability.
The same story is true of taxes and deregulation. The piddling income tax cuts will be more than offset by the programmed Social Security tax increase and the "bracket creep" caused by inflation. The tax on interest and dividends stays at the disastrous 70 percent top, and the capital gains and corporate income taxes are not touched. The pledge to index income taxes to eliminate bracket creep is not fulfilled, and the grotesque "windfall profits" tax on crude oil—really a graduated excise tax on crude oil production—continues in force because, as the Reagan people unabashedly admit, "we need the money."
The returns on deregulation are not all in yet, but the picture there looks the same. The much-touted Reagan "deregulation" order merely suspends (not abolishes) increases in regulation programmed by the Carter administration. Their fate is then to be decided by the now fashionable spurious "cost-benefit" analysis. The best guess is that, as in the case of spending and taxes, there will only be a modest cut in the rate of increase of government regulation of industry.
Why then the media hoopla about the "historic" and "revolutionary" changes being proposed by Reagan? Conservatives and liberals both have their own reasons for enormously magnifying the importance of the event.
Conservatives want to help the Reagan administration strategy of turning inflation around by pure hype and bombast. Previous administrations have tried to reverse accelerating inflationary expectations either by wage-price controls or by "jawboning": trying to talk business and unions into lowering prices and wages. The strategy of the Reagan team is to try just another form of jawboning: by making a big fuss and fury about the budget, taxes, etc., it is trying to con the public and the market into thinking a lot of great things are going on. The Reagan administration is trying to reverse inflationary expectations and build public confidence in the dollar by trickery—by mirrors rather than solid performance.
For a short while the con will work, aided and abetted by the usual honeymoon that an ever-naive public grants to each new miracle-working president. But soon disillusionment will set in, the public and the market will realize there is nothing there, and inflation will accelerate again. The Reagan honeymoon will be over with a bang.
The liberals' collaboration in the fraud is more far-sighted. They will aid Reagan in trying to con the public because in a year or two, when everyone realizes that the Reagan program isn't working, everyone will give up on the free market, drastic budget and tax cuts, and hard money and minimal government. The free market and hard money will be discredited forever, even though it was tried only in rhetoric.
And that is precisely the danger with the Reagan program. Like Mrs. Thatcher in England, the president is giving us all the fiery and hard-hitting economic libertarian rhetoric but none of the substance. Since, after a brief honeymoon, only solid reality will work, the Reagan program faces inevitable collapse. All those who care about the free market, hard money, and minimal government must begin to act now to prevent this. The Reagan program must be denounced fiercely and uncompromisingly as a fraud and a deception. Otherwise, we all might as well pack it in for another century.
Murray Rothbard is a professor of economics at Brooklyn Polytechnic Institute of New York and the author of numerous articles and books on economics, history, and the libertarian movement.