The American Deficit:

Fulfillment of a Prophecy?

" America will spend herself out of existence" Lenin (1917)

by Helen P. Rogers

WELLINGTON PUBLICATIONS CARMEL, CALIFORNIA

First Edition

Copyright © 1988 by Wellington Publications

All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from the publisher. Inquiries should be addressed to: Wellington Publications, P.O. 8ux 223159, Cannel, California 93923

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ISBN: 0-915915-02-2

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Ideas presented do not pretend to be original with the author but are gratefully acknowledged as stemming from the many books and magazines listed in the bibliography, audio and visual news sources as well as discussions with colleagues.

Other Publications by Helen P. Rogers Everyone's Guide to Financial Planning

Social Security: An Idea Whose Time Has Passed The Election Process

Report Series

Credit Risk

Unemployment insurance Goals

Investment

Renovation & Recycling Real Property

"Germany will militarize herself out of existence, England will expand herself out of existence, and America will spend herself out of existence."

(Lenin 1917)

Contents

PREFACE XV

SECTION ONE

THE GREAT AMERICAN DEFICIT 3

So What Else Is New? . . . Fancy Footwork . . . Government Shutdowns . . . Dealing with the Deficit . . . Inflation . . . Crowding Out . . . Wise Guy Recipe . . . Reducing the Deficit Without Raising Taxes . . . Blaming the Reagan Tax Cut . . . Tax Increases . . . Savings . . . Consumption . . . Does Spending Hurt? . . . Foreign Funds . . . Who Can Predict? . . . Federal Spending as a Percentage of GDP . . . Growth . . . Is the Deficit Real? . . . History of the Deficit . . . Facts and Fiction . . . Budget Procedure . . . Senate Budget Committee, January 1987 . . . Who Will Do It! . . . A Philosophical Problem . . . Fine Tuning . . .

No Way to Cut . . . Special Interests . . . Burying the Reagan FY1988 Budget

SECTION TWO

WE SPEND IT ON WHAT?

A LITTLE HERE AND A LITTLE THERE AND PRETTY SOON ... 33

Park and Recreation . . . The State Department . . . U.S. Fish and

Wildlife Service . . . Department of Justice . . . State Employment

Services . . . Rural Electrification Administration . . . Timber Subsidies . . . Freedom Of Information Act . . . Arts . . . Security Exchange Commission . . . The Patent Office . . . Social Security . . .

Small Business Administration . . . Foreign Aid . . . The American Indian . . . United Nations . . . Civil Service . . . Pensions . . . Abuse and Fraud . . . Costly Congress

HOUSING 50

The Problem . . . Housing Vouchers . . . Rent Control . . . 1986 Tax

Reform . . . Make "Them" Do It! . . . Why Not? . . . Private Sector

Horror Stories . . . Only Chumps Play By the Rules . . . Thank You, Thank You Almighty Bureaucrats . . . The Power To . . . Ideas

Ideas . . . CDCs and LISC . . . Our Recalcitrant Congress . . . Shadow Markets . . . From Renter To Homeowner . . . Tomorrow's Creative Solutions

HIGHWAYS 64

Our Disintegrating Infrastructure . . . That Infamous Highway Bill

. . . Job Programs . . . Toll Roads In California? . . . Demonstration Projects . . . An Unpopular Moral Stand . . . Mass Transit-Who Wants It? . . . So Why Do You Stand For It?

EDUCATION 71

Demagoguery . . . Income Contingency Loan Program . . . Backward Incentives . . . Fairness . . . Senators Refuse To Cut . . . More Dollars . . . Say What? . . . Look Who Favors Subsidizing! . . . Spiritual Rewards

HEALTH 79

Priorities . . . Tough Questions . . . Trying To Achieve Equality . . .

Not Down But Up . . . Fair Chance? . . . What About Cost? . . .

Economically Justifiable? No Way! . . . Collective Thinking . . .

Problems Inherent In A Free-Market . . . Discrimination & Distributive Justice . . .The Bowen Plan . . . Let's Simply Require . . . Another Right? . . . Those Other Country Examples . . . Who Pays? . . . Senate Committee On Aging January 26, 1987

WELFARE 93

AFDC . . . Workfare . . . Legislating Compassion . . . Is This a Job for the Feds? . . . So Who's Blaming the Democrats for the Deficit? . . . Rights, Rights And More Rights . . . Never Enough . . . The Homeless . . . Who Speaks for America? . . . Not My Family, You Don't! . . . No More Boot Strap Stories . . . "Spoil" The Unfortunate? . . . Everyone Has a Solution

AGRICULTURE 103

Farmers Would Have Adjusted "On Their Own" . . . From 21% to 2.9% of the Employable Population ... Protecting Farmland From Developers . . . Farm Subsidies and Contradictory Policy . . . Playing the System . . . Outrageous . . . Surplus But At What Cost? . . . Farm Debt . . . America Must Choose—Revisited . . . Inept Policy-Makers . . . One For Lenin

. . . Proposals

THE ENVIRONMENT 111

Superfund . . . Acid Rain . . . Centralized Planning . . . The Free-Market . . . The Clean Air Act . . . The Water Bill . . . What Level ()f Funding Is Prudent? . . . Getting The Wrong Result—Again! . . . Get Government Out Of The Way

COURTS AND PRISONS ……………………………………………119

Hiking Court Fees . . . Fraud Against The Federal Government . . .

The Legal Fees Equity Act . . . "Pay-Your-Own-Way" Hurts Innocent

Defendants "Judicate" Justice Is One Thing BUT THIS IS

RIDICULOUS! . . . The Comprehensive Crime Control Act Of 1984 . . . Cheaper To Imprison Than To Execute . . . A Society Out Of Control . . . Overcrowded Prisons . . . Humiliation As An Alternative . . . House Arrest . . . Privately Operated Prisons . . . Something To Believe In

DEFENSE ……………………………………………………………. 125

Which Is More Important? . . . Defining Defense Spending . . . Getting The Dollars . . . It Grew & It Grew & It . . . No Coordination . . . Procurement . . . The Defense Contract Audit Agency . . . 3.5 Tons . . . 1984 Competition In Contracting Act . . . What Do You Mean

Uncle Sam Doesn't "Buy American"? . . . Competitive Bidding . . .

Watch Dogs . . . Hill Air Force Base . . . Multi-Year Defense Budgets . . . . Work Measurement . . . The Project On Military Procurement . . . Whistle-Blowers . . . Integrity . . . "Knick, Knack Paddywack-Give A Dog A Bone" . . . Absorbing Dollars . . . Military Health Care . . . Commissaries . . . The Military Retirement System . . . Expensive Weapon Systems . . . Contracting-Out . . . Good News

STATE AND LOCAL GOVERNMENT 145

Whose Will? . . . Lassen County, California . . . Sacrifice ... Income Tax Windfalls . . . Example Of Various States . . . Distributive Justice . . . Off-Budget . . . Whose Money Is It Anyway? . . . The Alphabet Programs . . . A Word to The Cities . . . U.S. Conference Of Mayors . . . An Admittedly Biased Look At California . . . ''There Ought To Be A Law"

SECTION THREE

WHO WE ARE AND WHAT WE WANT 161

Americans In The Eighties . . . No One Is Ordinary . . . The Heroes

Of WW II . . . The Baby Boomers . . . Redistribution Cranston's

Solution . . . Full Employment . . . Lenin's Foresight . . . Job Mobility . . . Unemployment Insurance . . . Those Statistics Again . . . Jobs Programs . . . "She Gave Them Some Broth Without Any Bread" . . . Dinks & Yuppies . . . The Two-Earner Phenomenon . . . AFDC . . . Child Support . . . Families . . . Official Poverty Levels . . . Non-Cash Benefits . . . Malfeasance . . . Choices . . . Women Can Have It All . . . Something To Live By . . . Child-Care . . . Consumer Spending . . . Tripping Through A Maze Of Figures . . . Bankruptcy Debt To Net-Worth Ratios . . . Savings Or Investments? Corporate Debt . . . No Cushion . . . The Noble Creditors-Wishful Thinking! . . . All Debt? You've Got To Be Kidding! . . . The Buck Stops . . . Amazing Growth . . . Bureaucrats Or Private Foundations? . . . The Chicken Or The Egg? . . . Volunteerism & Charitable Giving . . . Is The American Dream Still Possible?

SECTION FOUR

WAS LENIN RIGHT? 193

Capitalism . . . Is There A Widening Gap Between Rich & Poor? . . .

Wealth . . . Ralph Nader . . . Erroneous Study . . . The Disappearing Middle Class . . . More Other Countries . . . Statistics . . . Says Who?! . . . No Cold Turkey . . . Poor But Not Stupid . . . "One Potato, Two Potato, Three Potato"

. . . Proximate Cause . . . Still More Other Countries . . . Soaking The Rich . . . The Pastoral Letter . . . The Homeless Person's Survival Act . . . A New Right To Shelter . . . Consumerism . . . Immigration . . . The Oxford Analytica Study . . . Social Mobility . . . For Free! . . . Alright Already —Was Lenin Right Or What? . . . The United States Of America . . . The Great Experiment In Government . . . Go Ahead—Make Lenin's Day!

NOTES ……………………………………………..………….…..…. 229

BIBLIOGRAPHY 233

INDEX ……………………………………………………………….. 235

Preface

"If we fail to practice economy, if we do not balance the budget, then we shall have created a malevolent wheel which is revolving constantly in an adverse direction and which inevitably means the complete economic collapse of the United States. . . It would mean plunging the whole world into Darkness.”

Those were the impassioned words spoken in 1932 by Franklin Delano Roosevelt’s Budget Director, Lewis Douglas. Mr. Douglas was not only adamant in his belief that deficit spending must be curtailed, but that it must be curtailed without the benefit of increased revenue. As Arthur Schlesinger, Jr. put it, "A large tax burden he [Douglas] felt, would have economic effects almost as deplorable as deficit spending itself.”

One would hardly know that FDR and the majority of Democrats in Congress today were in the same political party. During his 1932 campaign FDR made a famous speech at Pittsburgh in which he proclaimed that "the one sound foundation of permanent economic recovery—a complete and honest balancing of the federal budget.”

Most of us would agree that the deficit is an urgent concern, even today in this supposedly enlightened post-Keynesian era. On the surface the solution appears simple: cut spending or raise revenue or some of both. Simple means uncomplicated but not necessarily easy. Naturally, no group is going to object if government spending benefits them. There's a lot of truth to the saying that if you rob Peter to pay Paul you can always count on Paul's support. Our society is wonderfully diverse. Have you ever noticed how a liberal refers to redistribution as sharing-the-wealth, whereas a conservative calls it soaking-the-rich? Chief Justice Earl Warren said some years ago: "Many people consider the things which government does for them to be social progress, but they consider the things government does for others as socialism.”

Our tax dollars, although they may not be used as efficiently as we would like, go towards ''What the people want", or so we are told. Who, after all, is against helping the poor, sick, elderly and very young? No one, of course. But poor, sick, elderly and young are what we call buzz words and are used to stifle opposition whenever tax dollars are wrested from us.

The Reverend Jesse Jackson, and others, feel supply-side economics has not worked. He favors what he calls demand-side economics. Many people feel the poor, sick, elderly and young (those buzz words again) are entitled to whatever resources are necessary to fund programs which serve their needs. To those whose main concern is social programs, it is incomprehensible that anything could take priority or hold a higher claim on our national resources They figure that deficits and higher taxes are a small price to pay in order to satisfy the needs of those who cannot adequately care for themselves.

On the other hand, Ayn Rand in her epic Atlas Shrugged maintains that" A morality that holds need as a claim holds emptiness-nonexistence as its standard of value; it rewards an absence, a defect. . .” I would like to have seen the late Ms. Rand and the Reverend Jackson in a debate. Of course that would never have occurred as I can’t believe either had respect for the other.

Before capitalism a portion of the human population had been doomed to extinction. It was capital in the form of new technology and machinery that gave future generations the possibility of survival. Man's inventions changed the world.

It's a favorite pastime of socialists to attempt to discredit capitalism by suggesting that the recognition of private property is a perversion of a primitive and more natural system of communal property. It is true that private property is a hallmark of capitalism.

In the middle ages, when Europe was steeped in that elaborate system of rights and duties known as feudalism, private property existed de facto, by custom, but not de jure, not by law. As man came out of the middle ages he substituted duty to the tribe and concern for the common good for duty to the tribal chief or nobleman. In those pre-capitalist times wealth was believed to be an anonymous product of the tribe belonging to all members of society equally. Today conservative capitalists consider this notion as nonsense, believing instead that all wealth is produced by some individual and belongs to the individual that produced it. Most would agree that there is no such thing as a national resource without individual initiative.

Central to the belief of Karl Marx and other opponents of capitalism was the idea that the rise of capitalism had been detrimental to the working classes. The reports of the early 19th century as chronicled in most history books and in the still popular novels of Charles Dickens, reinforced that supposition despite the fact that after the price fall of 1820-21 the purchasing power of wages in general was definitely greater than it had been just before the revolutionary and Napoleonic wars.

xvi

Earnings increased and most men and women were better off even though protestations were louder than they had been in an earlier, supposedly more congenial, era.

However, Karl Marx was quick to admit that capitalism emerged because it offered more potentialities for mankind than was offered by feudalism and other forms of government. But he was equally quick to claim that wealth caused poverty as capitalists enriched themselves by exploiting workers and stealing the product of their labor. Capitalists, on the other hand, maintain that by doing well for themselves, risk-taking entrepreneurs created jobs and new opportunities for others as well.

In Book I of Capital, Karl Marx discussed the problem of finding an objective measure of the economic value of goods and services so that a just exchange of commodities would be possible. In the Ethics, Aristotle maintained a just exchange of qualitatively different things requires that they be of equivalent value and that this requires finding a way to measure that value. Aristotle decided that demand was the proper measurement for value. Equal demand will result in equal value as exemplified in trade. Demand, he says " ... holds all things together; for if men did not need one another's goods at all, or did not need them equally, there would be either no exchange or not an equal exchange.” Actually Aristotle was the first to admit that free competition is the only way to determine value and that everything else requires force. It seems that Aristotle and Marx are alone in proposing solutions to the problem of how to value different things in order to determine equivalents for a fair exchange, although the problem is being seriously studied by proponents of comparable worth today. Many years later Karl Marx explained the labor theory of value. Louis Kelso and Martin Adler in their 1958 book, The Capitalist Manifesto, declared that since capital produces wealth just as labor does, Marx's labor theory of value was incorrect. The universal cause of poverty, they claim, is failure of individuals to own sufficient productive capital.

The French Constitution included a clause which stated that "each of us places in common his person and his powers under the supreme direction of the general will.” The American Constitution included no such sentiment and for good reason.

Some years ago Ralph Nader and Milton Friedman had a revealing disagreement. The issue was whether government had the right to require motorcyclists to wear helmets. (An issue heatedly debated also in 1987.) Dr. Friedman, quite naturally objected to interference with an individual's free choice, whereas Mr. Nader insisted cyclists be required to wear helmets in order to reduce their chance of injury. He reasoned that since taxpayers foot the bill for public ambulances, highway patrol and emergency medical facilities they have the right to make such a demand. The stupidity of refusing to wear a helmet was not to be tolerated in Mr. Nader's protective society.

In the words of Alexis de Tocqueville: "A government that provides total security for its people, foresees and supplies their necessities, manages their principal concerns, directs their industry, regulates the descent of property and subdivides their inheritance-what remains but to spare them all the care of thinking, and all the trouble of living.”

I intend to show that government spending, instead of a "good" which we must stoically cut because of our immense deficit, is really undesirable and should be restricted even were it not for the deficit.

Helen P. Rogers

Carmel, California

July 23, 1987