Principles – Nov 11, 2009

Folks seem to think these days that Republicans are the Party of No – no ideas of their own, all they can do is try to stop what the Obama administration is trying to do.  So I thought it might be a useful refresher to restate some principles.  Caveat – these are what I consider to be bedrock conservative values.  They are not necessarily what Republicans do all the time: there is a difference.  Nor all conservatives; there is always friction where the rubber meets the road, and sometimes what can be done is more important than what should be done.  Sometimes.
At any rate, these are stock Reagan conservative ideas, and I make no apology for it.  It is important to know what you stand for.  If someone can offer a similar set of principles underlying liberal or Democratic positions, I’d be keen to see it – they seem too often to be a hodgepodge of constituency panderings.  But perhaps I am just ill-informed.
1.  Freedom trumps equality.  This is perhaps one of the greatest tensions in modern politics – how does society’s obligations to lift its least measure against the notion of individual freedom upon which we were founded?  For me, freedom is paramount.  When government sets out to play Robin Hood, or to limit the prerogatives of some for the benefit of others, it inevitably starts down the road of coercion.  And once coercion is accepted in principle, it is very difficult to draw a line and say, “no more.”
The founding expressions of our country all revolve around freedom, not equality: “life, liberty and the pursuit of happiness”; “from every mountain side, let freedom ring”; “give me liberty or give me death”; “the land of the free, and the home of the brave”.  Now, I’m sure liberals also believe in political freedom, in the sense that dictatorships are bad and a people should have the ability to choose their leaders.  But for conservatives it also means economic freedom.  It is a core tenet of our belief system that capitalism and the free market are far and away the best set of economic rules – they produce the greatest wealth, the greatest general welfare, and – importantly – the greatest opportunity for people to command their own destiny.  It is an intensely moral view, that an individual should have the autonomy and the freedom to be responsible for his own success and welfare.
There have been countries and societies that value equality more than freedom.  In their purest expressions, they are inevitably tyrannies – Soviet Russia, Communist China, North Korea, Cuba, as well as Nazi Germany and Fascist Italy.  It is often mistakenly thought that because the Nazis and Fascists were anti-communist, they were somehow allied with conservative beliefs; nothing could be further from the truth – Nazi, after all, stands for National Socialist.  They were heavily racist and nationalist, as opposed to the “international brotherhood” of the communists, but they were the same in that economic decision making resided with the government.  All these systems crushed individual initiative and self-expression and directed economic energy to the areas governments chose.  And they were all colossal economic failures.
There have been other countries, of course, that have not been so completely socialist – much of Europe, for instance, considers US-style capitalism to be barbaric.  But it is the European model that suffers from chronic high unemployment, low productivity, and sluggish growth (present circumstances in the US are somewhat unique, and not at all an indictment of capitalism, as I shall get to eventually; we will avoid the European fate if the current administration fails in its apparent wish to transform us).  Britain was a basket case, suffering low growth, high unemployment, and inflation until Margaret Thatcher cut tax rates and freed the economy from its shackles.  After that, Britain’s economy was the envy of the continent.
Because here’s the thing: when government steps in to take a hand in the economy – granted, often for the most creditable of reasons – it by definition causes uneconomic decisions to be made.  Uneconomic decisions, in turn, misallocate resources, leading to inefficiency and waste.  Even if the resources are allocated precisely to the area or group of people that the government intended to help, the fact of the misdirection sets up unintended consequences that cause harm down the road.  One of the glories of the market system is that it is self-correcting.  If prices get too high, sellers will come in to take advantage of the mispricing and bring the market back into equilibrium.  When government, on the other hand, sets a price too high – say, by raising the minimum wage – new unskilled workers will not emerge to drive the price back down because it will be fixed.  Instead, businesses will decline to hire, because an unskilled worker can not produce enough to justify the wage.  The result?  Greater unemployment among the unskilled – precisely those people that the politicians wanted to help. Unintended consequences.
So economic freedom is desirable on two levels.  First, the moral good of allowing an individual autonomy over his life and livelihood; second, because the free market is the fastest road to prosperity.
2.  This is why conservatives believe in small government.  Government spending is by its nature wasteful.  Milton Friedman is supposed to have said that every dollar you send to Washington gets you forty cents worth of government.  Think of it – even if government were trying to spend its money wisely, the decisions on what to spend it on depend so much on the competing of political interests (and on political calculations of the decision makers) rather than the economic benefit to be had that it inevitably will be detoured from the most productive expenditure.  If, for instance, ethanol is economically viable, why does it need subsidy?  And if it is not, why do we subsidize it?
And the beast never shrinks.  This is the thing that nags at true conservatives like a toothache.  There is a one-way ratchet in the direction of government spending.  Even periods where, like in the Reagan years, government spending is “cut” to great fanfare, by and large what is cut is merely the growth rate of the spending trajectory.  New programs take on a life of their own; they develop constituencies that depend on the largesse, and bureaucracies that need to justify their jobs.  I view the growth of government like an enormous rock that is rolling downhill – it takes tremendous effort and resistance just to keep its momentum in check.  Particularly when liberals are behind it shoving as hard as they can.  Part of that I believe is because they don’t view taxes as your money or mine; they view it as a fount of money, welling up as if from an underground spring, which is theirs to do with as they see fit.
Imagine how different the politics of spending would be if every single government expenditure had to be uniquely funded by a tax levee, or more vividly, by some collector who came to your door to take his due.  The doorbell would never stop ringing!  People would be writing checks all day long.  And the public annoyance would result in some changes in government priorities.  By severing the tax from the taxpayer, politicians freed themselves from the responsibility to be prudent stewards of that money.
3.  Profit is not a dirty word. It is what lies behind much of what makes our society vibrant and successful.  The possibility of lifting oneself up, of creating profit, is what encourages people to take risks, to start businesses, to try something completely new, to remake the world.  Without it, who would experiment?  What government program transformed the world?

I remember seeing a bumper sticker that said, “my health care is not for profit.”  Really? I thought.  What about the companies that produce the medicines you take?  Or the arterial stents that keep your heart beating?  Or the MRI machine that determined you had appendicitis?  Or the cellular technology that will soon enable therapies targeted to your genetic map?  All of these wonders of health care would not exist without the chance of making a profit.

I think progressives fail to appreciate how important the profit motive is.  On the one hand, they seem to find large profits a sign of something evil or at the least improper – witness how they rail against insurance companies, drug companies, oil companies, banks for making large profits.  Profits are good – companies that are profitable have money to hire, to invest in new technology, to develop new businesses; their stock prices go up, to the benefit of pensions all over the country.  On the other, they seem to think that people will take risks, create new inventions, serve their fellow man out of sheer altruism – or at least they should.  This is a nice thought, but foolish.  Finally, progressives also seem to see profitable companies as sources of tax revenue, without appreciating how damaging that can be.  Which leads to…

4.  Taxation is a necessary evil.  Conservatives are not knee-jerk antagonists to taxes.  We recognize that governments do useful things and need to fund themselves.  However, how you tax is exceedingly important.  Taxes are a drag on the economy.  They are like my hybrid car – when I step on the brakes, I transfer kinetic and heat energy from the tires to the battery, recharging it.  I also slow down the car.  In the same way taxes come from the momentum of the economy, but collecting them slows the economy. So the perfect braking (taxing) policy will recharge the battery (fund the government) with minimal cost to my forward motion (economic growth).   Liberals don’t see it that way.  They see taxation as a two-birds-with-one-stone opportunity: fund the government and also redistribute income from the haves to the have-nots.  Candidate Obama actually averred that the latter was more important: he told Charles Gibson in one of the debates that he would raise capital gains taxes for “fairness” reasons, even acknowledging that cutting such taxes raises more revenue.
It is a truism that that which you subsidize you get more of, that which you tax you get less of.  Tax policies that aim at successful individuals or companies out of some mistaken notion that they have lots of money and therefore are best positioned to “share” with others, end up creating an environment where there is less success, less money, less progress.  No poor man ever wrote out a paycheck.  Why do we persist in thinking rich people are somehow undesirable?  (Note, by the way, that it is always a corporate chieftan whose paycheck is deemed unjustified – nobody seems to begrudge A-Rod his $275 million.)  I was watching a focus group interview the other day and someone said they were OK with tax rates as high as 70%, saying “it depends on how much money they make and how much they need.”  How much they need?  Who has the right to say that?  If a government takes it upon themselves to determine how much is enough they have embarked on a road that leads straight to socialism – after all, “from each according to his abilities to each according to his needs” is a formulation from Karl Marx.
Think of it: what can a rich person do with his money that does not provide employment for someone else?  He can hire lots of staff – well, there’s jobs.  He can spend it on a lavish lifestyle – there’s jobs for the restauranteurs, winemakers, fancy car makers, private jet companies, and all the rest, plus the people they employ.  I remember when Donald Trump and Ivana divorced and people were scandalized that she felt she needed $20,000 a month for flowers.  Think of all the employment that provided for florists, stylists, delivery people, growers, etc.  Or the rich person could invest his money – well, there’s capital going into the market that will find its way to the next entrepreneur with a great idea, or else it will help enrich a pension plan that will pay for a steel worker’s retirement.  Short of making a bonfire with his cash, the plutocrat is a one-man jobs program. Why is that bad?  Do we want a tax program that allows the government to decide who gets a job rather than the person who earned the money?
Face it, at its heart this is what Maggie Thatcher called the politics of envy.  I can’t fly a private jet to Aspen, so I don’t like it that someone else can.  Unless, of course, it’s A-Rod.
What is going on now in the US is very scary – our progressive system of taxation has little by little excused over half the country’s population from an obligation to pay income tax.  Literally, a majority of the country is now a net recipient of tax revenue rather than a net payer.  How easy for them now to vote for more tax-funded gifts from the government.  When those who are footing the bill become a minority, majority rule can be a tyranny.
That’s plenty for one posting.  There’s more; there always is.  I hope you’ll stay tuned.
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