The Squeeze on the Middle on the Middle Class; W. H. Chamberlin

world, the British in the seven teen'th century, the American and the French in the eighteenth. The French was perverted and dis torted to some extent by the greater misery of the masses, es pecially of the Parisian mob, which lent itself to the manipula tion of extremist demagogues, in toxicated with doctrinaire ideas of establishing not equality of op portunity, the American ideal, but complete material equality, to be enforced by dictators operating in the name of virtue and using the guillotine whenever moral sua sion failed. Out of all the turmoil and excesses of the French Revo lution, its Napoleonic aftermath and the various royal, imperial, and republican regimes that fol lowed during the nineteenth cen tury, middle-class social and eco nomic values acquired a firm foot ing. France supplied some of the most eloquent and erudite expon91 92 THE FREEMAN February ents of the free economy, such men as Frederic Bastiat and Jean Say.

It is the nature of absolute power, whether it be that of a king surrounded with inherited pomp, ceremony, and pageantry or that of a revolutionary dictator, to recognize no limits on what it may do with regard to those un der its rule. So it is significant that John Locke, the outstanding philosopher of the British consti tutional revolution whose ideas very much influenced the leaders of the American Revolution, in sisted upon the natural right of man to "life, liberty, and prop erty." There was never any doubt in Locke's mind, or to those of the educated middle class for whom he spoke, that property, far from being opposed to liberty, is one of the essential rights of free men. Locke, a true liberal in the origi nal sense of a word now often per verted and misapplied, went so far as to describe the preservation of their property as "the great and chief end of men's uniting into commonwealths."

The rising and expanding mid dle class was open to any able and industrious citizen, whatever his origin and background. What they more or less consciously wanted and needed was a state authority strong enough to protect honestly acquired possessions against spoli ation but not so strong as to en gage in spoliation itself. No Taxation Without Representation It is not surprising that some of the movements that led to the establishment of the supremacy of Parliament in Great Britain and to the separation of the United States from Great Britain were triggered by one specific property right: the right of the individual not to be taxed without his con sent. In his effort to govern with out the inconvenience of having a Parliament in session, King Char les I resorted to an old tax known as ship money. In the past it had been levied only in time of war and in certain maritime parts of the country. Charles imposed the levy in peace, and without geographical limitations.

One of the leaders of the op position in Parliament, John Hampden, refused to pay the tax, contending that it was illegal. Seven out of twelve judges who heard the case, under strong pres sure from the Crown, ruled against Hampden. But his stand aroused nationwide attention and sympathy and, as soon as Parlia ment was again called, "ship money" was ruled illegal. Hamp den, a country landowner, was as willing to fight for liberty as to 1969 THE SQUEEZE ON THE MIDDLE CLASS 93 speak for it. When the differences between King and Parliament reached the point of civil war, Hampden raised a regiment among his tenants and lost his life in one of the many skirmishes and small battles that followed. In the United States, also, "tax ation without representation" was a fighting issue. Like many other small causes of big events, the British levies on stamps and tea were petty in immediate impact; but the underlying claim that a Parliament in London three thou sand miles away might lay imposts on colonists who were not (and, under the travel and other circum stances of the time probably could not be) represented there excited justified suspicion and resistance.

The colonists knew very well that taxation accepted without protest would probably mean double or treble taxation in the future. Irresponsible bureaucracy ranked high with arbitrary taxa tion among the causes which led the American colonists, when pro tests and remonstrances had failed, to take up arms. This is evident from the following clause in the indictment of King George III in the Declaration of Inde pendence: He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our People, and eat out their substance. How surprised and shocked would have been the men who fought against a foreign tyranny at Lexington and Bunker Hill and Saratoga and Yorktown if they could have foreseen today's bu reaucratic monster, in the shape of Federal, state, and local govern ments, costing almost $9,000 a second to operate, and doubling its exactions from the labor of its citizens every ten years.

Design for Limited Government N a such monster was envisaged in the Constitution which the de liberations of a representative group of leading citizens of the various states yielded as the con structive fruit of the achievements of the American revolutionaries in arms and diplomacy. It is an un commonly useful and instructive exercise periodically to read over this charter of American laws and liberties. And one of its most striking features is the sparseness of promises as to what the new government will do for the people (indeed, there are practically no such promises), compared with the many explicit guaranties as to what the government may not do to the people as a whole or as in dividuals. These immunities in cluded, until the adoption of the Sixteenth Amendment in 1913, as surance against the imposition of the graduated income tax.

94 THE FREEMAN February The kind of government out lined by the American Constitu tion is in line with the political philosophy of John Locke and Adam Smith that "every man is by nature first and principally com mitted to his own care." What the Constitution promised is not to make each citizen healthy, wealthy, and wise - something beyond the power of government - but to re move state obstacles to his achiev ing these objectives by his own ef forts. This was the logical outcome of the struggle against absolute mon archy and feudalism, a struggle in which the middle class played a leading role. It was under this phi 10sophy that the middle class pros pered and expanded, because it was no closed hereditary caste but a group in the community which any one might join with the requisite conditions of industry and ability. Social Security? But today, at first gradually and imperceptibly, then more boldly and blatantly, a completely differ ent philosophy of statism has tend ed to supplant individualism, both in the United States and in Great Britain and in varying degrees in other Western countries. (One need hardly refer to the European and Asian countries where the in dividual has lost all liberties -eco nomic, personal, and political, to the grasping thrust of an all-pow erful state).

Under this philosophy the gov ernment promises its citizens vari ous forms of alleged security, in return for which it exacts a first lien on what they earn by their la bor, a lien that is indefinite and ever-expanding. The benefits may look good on paper; but their real value is steadily sapped by infla tion, the erosion in the purchasing power of the currency that is the invariable accompaniment of vast government spending. Increasing amounts are taken from every one's salary to pay for what is eu phemistically called Social Secur ity, while the dollars which may be some day paid out steadily dimin ish in value. Following British Lead This process has gone further in Great Britain than in the United States, so that a visit to Britain gives a preview of what may be the plight of the United States ten or twenty years hence. There was a time, before World War I and to a lesser extent in the interwar years, when the British pound was con sidered a desirable currency, not only to earn and spend, but to save.

No longer. Malcolm Muggeridge, leading British television commen tator, wrote recently: Our currency is gently expiring which lets us off any form of saving.

1969 THE SQUEEZE ON THE MIDDLE CLASS 95 It would be as sensible to save next winter's snow as the Pound Sterling. We have come to think of our cur rency as an ailing elderly uncle; yes terday he had a good day, this morn ing he. was feeling a little better, and able to sit up and take a little nourish ment, only in the afternoon to suffer a slight relapse. One day, of course, he will pass away - dear old Pound Sterling. It had to happen, hut even so he'll be missed. Mr. Muggeridge has a habit of satirical exaggeration; but there is plenty of evidence to support his dim view of his national currency. Wha t were once called gilt-edged securities are selling at fantastic discounts on the London Stock Ex change. New Zealand recently float ed a loan in London at 63;4 per cent, but with an interesting proviso: the value of the loan was to be reck oned in German marks, with corre spondingly higher interest and principal payments in the event of a devaluation or writing down of the value of the pound in terms of other currencies. Such a devalua tion did occur after the loan was floated.

The "English Disease" The lack of adequate incentives to capital and to labor - due to in flation and the steady depreciation in the real value of the pound - is a basic reason for what is called on the European continent the English disease: the inability of Brit ain, year after year, to balance its international payments, paying out more than it takes in. In America also the middle class finds itself more and more ground between the two millstones of inflation and ever higher taxa tion at all levels, Federal, state, and local. It is, of course, a basic part of the welfare state theory that government bureaucrats can spend an individual's money better than he would spend, or save, that money himself if it were not si phoned off in taxes. Some aspects of the 1968 election in the United States can only be interpreted as the desperation of -certain taxpay ing, self-respecting, substantial citizens confronted with continu ally higher tax bills while their wives complain of ever-higher prices at the supermarket.

The Tax Foundation recently re duced to specifics the impact of in flation and higher prices on an imaginary character named Char lie Green. Charlie is in relatively favorable circumstances; he earns $12,000 a year, up from $7,500 ten years ago. But not all is gold that glitters in, Charlie's pockets, even though his income is about $3,000 more than that of the average American family of four. Charlie has a 17-year-old son and a 15 year-old son and financing them through college, where board and 96 THE FREEMAN February tuition charges have been rising as fast as taxes, is not the least of his worries. Between 1958 and 1968, Char lie's Federal tax is up from $1,266 to $2,169: his state tax from $169 to $610; his local property tax from $590 to $1,301. All have been rising faster, the state and local tax considerably faster, than his income. And rising prices have wiped out $489 of his after-tax pay boosts.

What makes the outlook even gloomier for the economic survi val of the millions of Charlie Greens who comprise the middle class is the cumulative effect of many existing taxes. The full im pact of the expense of much of the social welfare legislation en acted by the spendthrift eighty ninth Congress has not yet been felt. This is also true .·of the cost of Social Security, which went up again, and appreciably, at the be ginning of 1969. As invariably happens with such handouts, the price tag of Medicare, Medicaid, and similar social patent medi cines is much higher than the original estimate. And there is no lack of in genious schemes for taking what others have earned, for reaping what has not been sown, for still further pillaging the thrifty for the supposed benefit of the thrift less. When, in a time of normal industrial activity, there are one million people on the welfare rolls of New York, when those who provide the most essential serv ices, teachers, policemen, firemen, sanitation employees, hold up an almost empty municipal treasury for raises out of all proportion to the rising cost of living, it is clear that something is radically wrong.

A Backbreaking Burden If present trends continue and accelerate, it is not difficult to foresee a time when incentive to creative work by hand or brain will disappear, because its fruits will be eagerly plucked by half a dozen sets of tax collectors. One root cause of the trouble is the change from the time when the American taxpayer was supposed to have done his civic duty when he supported himself and his fam ily and the religious, philanthrop ic, and educational causes of his choice. Now, he is expected to carryon his shoulders the weight of supporting millions of work less indigent in this country, as suring the triumph of democracy in countries that hardly know the meaning of the word, relieving the age-old poverty of Asia and Africa and Latin America, and paying the cost of such sociologi cal experiments as busing children for miles from their homes and 1969 THE SQUEEZE ON THE MIDDLE CLASS 97 rebuilding slums which he never made.

The burden is backbreaking and it will not be surprising if some Americans, despairing of relief from an intolerable situation, are tempted to· experiment with quack remedies that may be foolish and harmful. What is most needed is education in economic realities, education that will lead to reme dial action. When more people see the state as a robber baron that takes from them, not as a Santa Claus that gives to them, the prospects will have improved for the dismantling of the bureaucratic monster. (How completely out of hand this mon ster has grown is evident from the fact that the national budget, which only passed the billion dollar mark early in this century, now stands at $186 billion). One essential condition for reform is for the voter to use the power of the ballot more intelligently and discriminatingly than he does at present. Every legislator, every executive, at state and national levels, who makes new taxes neces sary should be marked for defeat the next time he runs for office.

When the majority of the people recognize that the free-spending leviathan state is the main source of their financial and economic grievances and insist on drastic retrenchment at any cost, the prospect of the survival of the independent middle class will be much brighter than it is at pres ent. ~ Contract or Status Using the word cooperation in its wide sense, and not in that restricted sense now commonly given to it, we may say that social life must be carried on by either voluntary cooperation or com pulsory cooperation; or, to use Sir Henry Maine's words, the system must be that of contract or that of status; that in which the individual is left to do the best he can by his spontaneous efforts and get success or failure according to his efficiency, and that in which he has his appointed place, works under coercive rule, and has his apportioned share of food, clothing, and shelter.

HERBERT SPENCER. The Man Versus the State (1884) 98 ConsiderYour Stand GOTTFRIED DIETZE Last fall, Students for a Democratic Society urged teachers to refuse to teach on November 5 (Election Day) in order to "protest an election without choice." The following memorandum of November 3, 1968, was addressed to "Teaching Assistants Concerned" by Dr. Gottfried Dietze, Acting Chairman, Department of Political Science, The Johns Hopkins University, Baltimore, Maryland.