Chipping Away at the Status Quo

Imagine my giddy delight when I heard Eric Zuesse discuss his REASON Love Canal story (Feb.) on the Larry King radio show and then, one month later, see a full half-hour devoted to this same story on ABC's Nightline. I could not believe my eyes. And then, lo and behold, Business Week's July 13th issue mentions John Baden and Richard Stroup's wilderness proposal, seen in the July REASON.

Keep on giving us free-market solutions to statist government-created problems, and I swear you people will turn this country around. Congratulations for such fine, concise writing that even the entrenched media at large cannot ignore the logical proposals put forth in REASON.

Peter Baker
Kennewick, WA

Pure Privatization

John Baden and Richard Stroup's "Saving the Wilderness: A Radical Proposal" (July) was a welcome alternative to the antiwilderness perspective of many free-market advocates. I completely agree with their view that the most serious threat to wilderness is government ownership and control. However, they imply that the major reason for the high level of US strategic metals imports is the withdrawal of wilderness lands from development and that therefore the only solution to the danger of a sudden cutoff of supplies is to develop wilderness deposits of these metals. I am not convinced by their argument.

Baden and Stroup acknowledge the inhibiting effect of tax policies, regulations, and antitrust actions on US mineral production but do not consider to what extent removing these would solve the problem. Nor do they mention the option of stockpiling strategic metals to prevent the "chaos" of a sudden cutoff.…

Because of their emphasis on wilderness resources, Baden and Stroup propose that the government turn over wilderness lands to environmental groups and then require that these groups either "develop" these resources (to whose satisfaction?) or "clean-up" an area equal in size.…The authors do not mention the alternative of simply privatizing these areas and letting the free market determine their best use. Although they have made an excellent case for privatizing wilderness areas, they have not justified government intervention to require resource development in these areas.

As a member of the National Audubon Society, I recently received a letter asking me to contribute to their Citizens Mobilization Campaign to halt the "anti-environmental onslaught." I have sent them a copy of Baden and Stroup's article, with a letter explaining why I will not support their campaign as long as it is aimed at maintaining and increasing government ownership of wilderness lands and urging them to work toward transferring control of these lands to private organizations.

Joseph Maxwell
Chicago, IL

Mr. Baden replies: Our primary motivation in writing this article was to focus thought upon property rights as an alternative to public ownership and control. In my view, the details of the arrangement are far less important than the fact that other arrangements are indeed possible.

I am convinced that with clear and enforceable property rights, the private sector would come far closer to the optimal level of stockpiles than would any governmental agency. Essentially, residual claimants face strong incentives to hold the optimal level.…Of course, the incentive for entrepreneurs and financiers to devise systems for safely stockpiling strategic minerals is substantially reduced by some government policies, such as the windfall tax on oil profits. The question becomes, Why risk and save if the benefit for so doing is expropriated (taxed away)? Perhaps a constitutional amendment is in order.

The issue of developing wilderness lands held fee simple by environmental groups creates no special problems. As long as these groups hold the land fee simple, they face the opportunity costs of a failure to develop. In general, only from 0.5 to 2 percent of any wilderness land is likely to contain minerals in sufficient concentrations to merit their development. Clearly, aside from the public goods argument, the best alternative is merely to auction off the land. From this perspective, ours is the second-best solution. It may, however, be more politically acceptable.

I am pleased that we have not justified intervention requiring resource development in wilderness areas. I would be quite disturbed at our success had that been our goal. It assuredly was not.

Spotlight on Aliens

Thank you for Robert Sheaffer's article, "NASA Flimflams Congress" (Aug.). Excellent investigative reporting. However, I must admit that I don't mind NASA spending my tax dollars on their crazy scheme to find extraterrestrial intelligence (or, as they call it, SETI). I just hope they won't want the taxpayers to support the unemployed extraterrestrials when and if they find them! But just in case they do, I have a plan to deliver to my more liberal friends (shame on me), which will be to form an organization called STAF, that is, Save The Aliens Foundation.

Perhaps I will notify Dale Lowdermilk, instead. I very much enjoyed the lighthearted Spotlight on Lowdermilk by Patrick Cox in the same issue. More of the same, please. Lowdermilk responds in kind to the ridiculous. He has a brilliant idea.

Cheryl Boswell
Denham Springs, LA

One Man's Poison…

The August issue contained a letter urging you to give less proportionate space to articles and features concerning economics. I personally find the economics articles to be the most interesting part of the magazine.

Economics affects all aspects of our society. It is impossible to set the economic picture right without accruing fallout benefits to everything else. Additionally, once the economy is straightened out, it will be easier to deal with other issues. Then too, there are not many publications which print good material on economics. People such as John Kenneth Galbraith get entirely too much press, and most people don't realize that his type of thinking is part of the problem, not part of the solution.

R.W. Suit
Virginia Beach, VA

Stamp Correction

An error occurs in your June article "'Stamping' Out Inflation," in regard to the formula for computing "compounded annual rate of increase." Presumably the author means the effective annual rate of increase for continuous compounding, in which case the quantity "I" in the formula should be the ratio of the selling price to the buying price (and not the difference as stated).

The corresponding formula for the effective annual rate compounded annually would be the Nth root of the above ratio minus one, where N is the time in years that the investment is held.

The tabular data presented is correct however; that is, it is calculated in accordance with the correction described above.

Larry Kuhns
Woodland Hills, CA

Hanging Tough

In your May editorial, you suggest "tough diplomacy"; that is, the US offer to decommission and retire the base at Guantanamo to Cuban sovereignty provided the USSR will remove its bases from Cuba. Is this being "tough"?

For a two-year period a little more than a decade ago, I exercised all the influence I had as a senior defense official to keep Guantanamo. I did not think then and I do not believe now that the way to maintain a US presence in a region or US prestige in the real world is to further withdraw from overseas—or our own backyard, in this instance. Such withdrawal, rightly or wrongly, is perceived as weakness and does not seem advisable when Central America is undergoing a "Castro-type" experience and after the Panama Canal episode.

It is true that Gitmo does not have the strategic significance it had before nuclear warfare, but it does provide an excellent harbor, supply facilities, etc., for conventional military operations. US presence there prevents the presence of other powers. Of lesser importance is the role Gitmo has in naval operational training because of its unusual access in an hour's time to blue water, although this takes on greater importance with the buildup coming in US naval forces.

However, the "perception" aspect is my overriding concern. I think it is better Yankee trading to hang on to something the Soviets want and give it up for a concession from them than it is to give up something the Soviets want us to give up in return for their getting out of a place where they shouldn't have been in the first place.

Richard A. Ware
Ann Arbor, MI

Mr. Ware was principal deputy assistant secretary of defense, international security affairs, 1969-70. —Ed.

Tough Questions on Latin America

I am appalled that REASON would publish on page 35 of the May issue ("An Open Letter to President Reagan"), the sentence, "And our sadly neglected national defenses must be refurbished after years of getting short-shrift from otherwise big-spending politicians." Haven't you people heard: "War is the health of the state"?

I am also disturbed by the Editorial of the same issue, which correctly identifies the problem of US intervention pushing Latin America into the arms of the Communists, yet goes on to advocate "tough diplomacy" involving attempts, albeit nonviolent ones, to manipulate events in Latin America. While I'm pleased that Mr. Poole shrinks from endorsing dictators, I am dismayed to learn that he seems to think that "nonintervention" means only "noninvasion." If the Guantanamo naval base is really "of little military value to the Navy," then we should not use it as a bargaining chip but close it immediately, to save the money involved in running it and to make it harder for Castro to scapegoat the United States. And the suggestion that the United States should negotiate over "access to US grain and technology" rests on the shaky assumption that the US government has the right to interfere with deals between residents of the United States and foreign nations. While the government now claims that right, it is inconsistent with every libertarian scheme that I am aware of.

Mr. Poole implies that we can liberate the hemisphere "by staying out of internal disputes and by keeping the Soviets out, too." Hardly. The right to deal with whom one pleases does not stop at national borders, and it does not disappear if one or both parties happen to be criminals, by whatever definition. If revolutionaries anywhere think the Soviet Union will help them, it is not the function of our government to stop them. Latin Americans are hardly encouraged to achieve a condition in which they can realize and defend their own rights as long as the United States continues its historic course of continually violating them and of pressuring Latin American governments. And the Soviet Union cannot be "kept out" of Latin America by the US government without violating someone's rights, either in the United States or in Latin America. The only thing which will keep them out of Latin America is the same thing that really keeps them out of the United States—a hostile attitude on the part of the inhabitants.

Mike Lenker
Houston, TX

Return to Reason

I began reading REASON again this January after a lapse of several years. I am impressed by your magazine's quality now as then. You present articles of importance and interest by people who write in a tone of sanity and emotional maturity. This is very important to me; I would not read REASON if these qualities were less apparent.

I particularly enjoy Trends, which is consistently positive and hopeful. That is important to me when so much of what the media presents is discouragingly anti-free enterprise and anti-freedom. Health & Welfare is a good column too—some very interesting and useful information there, a welcome addition to REASON.

The only feature of REASON I dislike is Brickbats. Hazlett's anecdotes fail to make any conclusive point.…He generates a tone of absurdity similar to that of National Lampoon, which I particularly dislike. This tone seems out of place in REASON and I think it detracts from REASON's credibility and effectiveness.

Keep up the good work.

Jeff Tower
Denver, CO

Supply-Side Politics

The "supply side" fad pushed by J. William Middendorf II and Bruce Bartlett (July) is such a far cry from laissez faire that libertarians will not fall for it. Certainly, Murray Rothbard hasn't (June). But there is one statement that Bartlett made which is so outrageous it must be answered.

Bartlett believes in the same fallacy as the liberals do. He introduces the false dichotomy between "economic" freedom and "political" freedom. In Liberal Fantasyland we find the latter without the former. In Bartlandia, "it is possible to have a free-market economy without political freedom, but you can't have the converse…" Where, one wonders, does such a place exist? Why, it's the "free-market" dictatorship of Chile.

As libertarians realize, economic freedom and political freedom are two sides of the same coin. You can't have one without the other. A free market is impossible when a nation's citizens have the fruits of their labor confiscated to pay for government atrocities, the enforcement of victimless "crime" laws, etc. There ain't no such thing as a free lunch!

Introduce a few meager market mechanisms, and Bartlett thinks the "free-market economy" has arrived. No doubt when the Chilean government only jails political dissidents instead of murdering and torturing them, Bartlett will announce to the world that political freedom is a reality in Chile.

Howard L. Glick
Madison, WI

Tax Questions

Timothy Condon's otherwise excellent "Letter to the President" on the IRS (May) is marred by his suggestion that the income tax be replaced by a tax on consumption, i.e., a sales tax. Far from righting the "inequity of taxing people for working hard," a sales tax would create even worse inequities. I assume Condon's consumption tax would fall on all goods nationwide, including food, but would not fall on labor services. Then if a flat rate 13 percent income tax would bring in the same current federal revenues, and if say one-third of all income is ultimately spent on labor services such as barbers, then the United States would require a 20 percent sales tax (or purchase tax) to cover its current revenues. This on top of existing state sales taxes!

If you have to pay a 20 percent purchase tax on all goods, this has much the same effect as a tax on your income. Furthermore it creates an inequity between services and goods, if labor is exempt from the tax, by distorting the market in favor of services.

The sales tax forces sellers of goods to be tax collectors for the government.…Besides the bookkeeping headaches (ask any store keeper), a high national sales tax would result in a tax gestapo just as bad as that of the IRS. If you doubt this, take a look at what's happening in Great Britain, where the value-added tax (producer's sales tax) inspectors have "been known to make gestapo-style raids on homes when the occupants are in bed and then to search every nook and cranny of the premise to check that the correct amounts of VAT have been paid," (Land and Liberty, Jan./Feb.).…

And the suggestion that the sales tax would "promote savings" should be revolting to lovers of freedom. The government has no business telling me how to use my hard earned income! Under a sales tax, investments in gold, stamps, and other tangibles would be (and are) heavily taxed, whereas bonds and, presumably, stocks would not be so taxed. The State would thus create yet another inequity for investors. Would houses be subject to sales tax? If you are to be consistent, they would be. Imagine paying a 20 percent tax on the purchase of a $100,000 home! That's equal to the downpayment alone. What would this do to the housing industry?

Advocates of a consumption tax forget that if a person sells a good, the money he gets is income. There is little difference between charging the buyer a 20 percent tax on a product and charging the seller the same 20 percent. The seller would just raise his price by the 20 percent. The result is to raise the price of all goods and reduce real spendable income.…

In the near future the government may be considering a value-added tax to squeeze out ever more money from the economy. Those opposed to oppressive taxation should work to eliminate all taxes on economic transactions, including sales and use taxes, tariffs, value-added, and excise taxes. All these are taxes on labor and capital, all inhibit production, all are arbitrary, oppressive, and unjust. Suggestions for a national consumption tax undermine the efforts of libertarians in California and elsewhere to get rid of the sales tax.

Let's work to end both the "progressive" income and the sales tax. Let's not just shift them around from one inequity to another.

Fred E. Foldvary
Berkeley, CA

Mr. Condon replies: I find it difficult to argue with anyone who loathes taxes in general, as does Mr. Foldvary. However, the "progressive" income tax—hereafter referred to as the PIT—is a fact of life, and undoubtedly the most pernicious one we face. Our disagreement is not, "Where do we go from here?" but rather, "How do we get from here to there?" I believe the destruction of the PIT is an invaluable first, halting step. There should be many more to follow, but dismantling the PIT should be a first priority because of the following: (1) the PIT encourages government to create inflation, which in turn helps government grow in size and power; (2) the PIT helps destroy existing capital pools and assists in preventing the formation of new ones—the former because capital tends to flee to nonproductive assets in the face of inflation, the latter because of sharply increasing confiscation levels as well as double taxation on money earned by capital; (3) the PIT deadens social mobility—the more industrious and productive one is, the higher the levels of taxation become, thus effectively slowing upward mobility; (4) the PIT, as a form of institutionalized covetousness, splinters potential resistance—those at the bottom of the income scale applaud "making the rich pay more," even as their own earnings are expropriated at increasing rates.

Neither the flat-rate income tax nor a consumption tax shares these extremely pernicious features of our present tax system. That in itself is enough to warrant scrapping the PIT. I also believe that a simpler system of taxation—any system—would obviate the need for the powerful and ubiquitous tax police which the PIT has spawned.