Economic Outlook: The Mismanagement of the United States Economy

The mismanagement of the United States economy falls on our economists and politicians. Anyone who is not at least mildly panicked about the inflation outlook for the U.S. does not recognize the seriousness of the situation.
By the MOTHER EARTH NEWS editors
July/August 1978
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The mismanagement of the United States economy falls equally on our country's economists and politicians.
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Learn about the mismanagement of the United States economy and why our economists and politicians share guilt in causing these problems.

The Mismanagement of the United States Economy

Regular readers of this column know that it has repeatedly pinned today's terrifying inflation, steady erosion of social values, and most of the other ills which now plague the world squarely on the fuzzy-brained, give-everybody-everything politicians and economists who have so drastically mismanaged the planet's economy since the end of World War II.

And, for a long time, it did about as much good as hollerin' down a rain barrel. But the tide is beginning to turn! All of a sudden, in fact, it seems that everyone — from U.S. Senate staffer to liberal college professor to ghetto resident — is beginning to understand how we all got into the fix we're now in . . . is beginning to understand that mushrooming Big Government — and the pinheaded bureaucrats which staff it — is the cause of (and in no way a solution for) the problems we currently face. Some evidence: "I don't really think government can do much about inflation," said Little Jimmy Carter back in the spring in answer to a newsman's question. Well, maybe our President really is that naive (after all, he did say he'd never tell us a lie) . . . but Business Week magazine isn't. The periodical's May 22, 1978 issue — in fact — was built around a hard-hitting cover story ("The Great Government Inflation Machine") that laid the cards out on the table where even a barefoot boy from Georgia could see them. Some quotes:

"Anyone who is not at least mildly panicked about the inflation outlook for the U.S. does not recognize the seriousness of the situation . . . . The grim fact is that the country is caught in the grip of the worst, most prolonged, and most pernicious inflation in its history. Inflation has reached the point where it is destroying the nation's efforts to achieve solid economic growth, is wrecking the financial markets, and is blasting the retirement hopes of everyone over 65 years of age . . . . And this is happening because of — not in spite of — the way that the democratic decision-making process works in Washington . . . . The real villain is the federal government which has been running huge deficits for years.

"For a decade and a half, the U.S. has pursued seductive, self-deluding economic policies . . . . Instead of contributing to the well-being of the nation, these policies have generated a disastrous rise in costs and prices that strains the fabric of American society and threatens to paralyze the American economy. If President Carter plunges ahead on the same course, he will risk not just a painful inflation and a subsequent depression but a breakdown in the whole economic and political structure of the country."

Are taxes starting to get you down? Do you sometimes feel that the government now asks too much? Does it frequently seem that all those federal taxes, state taxes, county taxes, sales taxes, inventory taxes, excise taxes, property taxes, social security taxes, and all the other taxes that you now "voluntarily" pay . . . add up to an intolerable burden?

You're not alone. Senate staffer Paul Craig Roberts has done a little homework on the subject and — in a recent issue of Harper's Magazine — stated: "In relative terms our position today is worse than that of a medieval serf, who owed the state one-third of his working time. In 1976 government had a claim to 42% of the U.S. national income."

Mr. Roberts also explained why the criminals in Washington love to blather on so much about "tax reform to help the poor" and why the same miscreants always pretend to "fight" inflation while secretly doing everything in their power to encourage it. "Tax reform to help the poor is easy," says Roberts. "The poor don't pay any taxes. And inflation is a boon for our free-spending politicians because it pushes citizens into higher tax brackets faster than their incomes rise. A 10% rate of inflation, for instance, produces a 16.5% revenue gain for the government."

And if you've sorta halfway suspected that the cost of everything you've bought in the last few years has skyrocketed — at least in part — because of a sudden overload of wasteful and counterproductive drones in Washington . . . you're absolutely right. The Center for the Study of American Business at Washington University in St. Louis has released a report which says that the combined budgets of just the federal government's 41 regulatory agencies have mushroomed from $2.24 billion (in fiscal 1974) to a projected $4.82 billion (for fiscal 1979).

"This is a direct measure of the rising intervention of government in the economy," stated Murray L. Weidenbaum, the center's director, in a Wall Street Journal interview. "These expenditures represent a growth rate that is unsurpassed by the federal budget as a whole, the population, the gross national product, or any other applicable basis for comparison.

"Furthermore, our overriding concern isn't just the $4.82 billion that the federal government will spend on regulation in 1979 . . . but the costs that business will then incur as it complies with those regulations. Our studies indicate that there's about a 20-to-1 multiplier effect involved. Which means that government regulatory actions in 1979 could easily cost business close to $100 billion. And that extra $100 billion, of course, will ultimately be passed on to the consumer."

And how does all that government regulation hit the consumer (you) in the pocketbook? One example: The U.S. Labor Department estimates that licensed workers of one kind or another now make up an in credible 25% of the employed labor force in some states. "But that's good," you may say. "It guarantees that I'll have a qualified, competent person to turn to when I need a critical job done. It means the work will be handled in a professional manner. It means I won't be overcharged."

Think again. Business Week reports that — after two years of analyzing 31 occupations ranging from embalmers to real-estate brokers — economists at the University of Tennessee in Knoxville have concluded: "The more stringent the licensing requirements, the lower the quantity and quality of service consumers receive. Licensing produces a 'Cadillac effect' by providing high-quality service for high — income consumers. But those on low incomes, who cannot afford to pay the higher price, are forced to go without service, do it themselves, or rely on low-priced, unlicensed 'quacks'."

More specifically, the study found that consumers are forced to do their own plumbing far more often in states with stricter licensing . . . that houses stay on the market longer in states with more stringent real estate licensing requirements . . . that the seven states with the strictest rules for the licensing of electricians have up to 10 times more accidental electrocutions than the national average.

Furthermore, another study — run by Stuart Dorsey of Western Illinois University — has demonstrated that occupational licensing (which requires written as well as practical tests) discriminates against minorities and the poor. (Blacks fail barber and cosmetologist written exams 40% more often than whites, and high school dropouts fail 15% more often than high school graduates.)

Whether you love these results or hate them, there's one thing that's hard to deny: Here is yet another example of your tax dollars being used against you to increase the prices you pay for everyday items and services, lower the quality of those items and services . . . and isolate you from the opportunity and upward mobility that the free enterprise system is supposed to make available.

And whatever happened to all those sinister professors who were supposed to be subverting the U.S. free enterprise system from secure tenured teaching positions on college campuses across the land? Maybe they never existed in the first place . . . or, if they did, they must have had a dramatic change of heart.

A national survey conducted for the Chronicle of Higher Education found that a full 81 % of all the college professors in the country agree that "the private business system in the U.S., for all its flaws, works better than any other system devised for advanced industrial society" . . . that "the growth of government in the U.S. now poses a threat to the freedom and opportunity for individual initiative of the citizenry" . . . and that "economic growth, not redistribution, should be the primary objective of American economic policy".

Another surprise. If you think the traditionally liberal teaching establishment is swinging to the right, you ain't heard nothin' yet: So is the ghetto! A poll of the poor, down-and-out residents of New York City's notorious southwest Bronx — for instance — has revealed that they favor tougher welfare regulations by a 77 to 16% majority . . . stricter sentences for looters by 95 to 2% . . . restitution of the death penalty by 66 to 29% . . . heavier punishment of juvenile offenders by 89 to 7% . . . and an 80 to 16% majority like the idea of making welfare recipients earn their "paychecks" by cleaning New York City's filthy streets.


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