The Politics of the "Fair Share"; G. North

If voters will not vote in terms of the need to stop spending specifically, their call to stop spending generally has no teeth in it-no political sanctions. The politicians respond only to political rewards and threats. There are no great rewards for spending less on specific projects. On the contrary, there are penalties. The politicians Dr. North is president of The Institute/or Chris tian Economics in Tyler, Texas. vote accordingly: more spending on specific projects. Out of Control If someone is both out of control and is a threat to others, he is supposed to be placed under restraint by the civil authorities. What happens when it is the civil authorities who are out of control? We are seeing the answer to this question. We are eyewitnesses to a loomingdisaster-a disaster financed by our money and resources. Political institutions in a free society do not become a threat to the voters overnight.

The process takes a long time. Economists prefer to explain the process of decline in terms of incentives: Somehow, destructive behavior is being subsidized. Political sci entists explain such defects as products of poorly designed political institutions. Soci ologists appeal to broad social forces that pressure politicians to do destructive things. Moralists search for evil intentions on the part of those who hold power. Theologians may go so far as to say that destructive political orders are God's judgment on re bellious societies. Everyone has his favorite explanation. Everyone wants to lay blame somewhere ... usually somewhere else. Almost everyone wants to evade responsi bility. And that is the heart of the problem. 448 In the Hearts of the People In the eighth century B.C., the prophet Isaiah warned the nation of Judah: "How the faithful city has become an harlot! It was full ofjustice; righteousness lodged in it; but now murderers. Your silver has become dross, your wine mixed with water: Your princes are rebellious, and companions of thieves; everyone loves bribes, and follows after rewards. They do not defend the fa therless, nor does the cause of the widow come before them" (Isaiah 1:21-23). But he did not lay the blame solely on the rulers; he laid it on the whole nation: "Alas, sinful nation, a people laden with iniquity, a brood of evildoers, children who are corrupters!

They have forsaken the LORD, they have provoked to anger the Holy One of Israel, they are turned away backward" (Isaiah 1:4). Isaiah recognized that the rulers were representatives of the people. The rulers did evil things because the people in their own lives were also doing evil things. This is not to say that all the people were guilty of rebellion. The prophet Elijah was told that a remnant still existed in Israel: a small group of seven thousand people who had not bowed to Baal (1 Kings 19:18). But the majority of the nation was involved in re bellion. Their political institutions had not preserved the nation from evil. Friedrich Hayek wrote in 1944 in The Road to Serfdom that in a political order that promotes compulsory wealth transfers, the worst people will rise to the top. The lure of power increases when power is concen trated at the top. The ruthlessness required to rise to power in such a power-driven political order will ensure that the worst get on top. He wrote this in the era of Adolf Hitler and Joseph Stalin.

Hayek's critics denied his argument. They denied that it was socialism as such that allowed Hitler and Stalin to come to power. They insisted that other factors must have been involved. But from 1944to the fall of the Soviet Union in 1991, the worst kept rising to the top in the countries with the most centralized economies. 449 Friedrich Hayek (1899-1992) Hayek blamed the economic system: so cialism. The West's socialists blamed the political system: anti-democracy. The Com munists blamed counter-revolutionary forc es: saboteurs. But almost nobody blamed the people who lived under tyranny. Long before Lenin appeared on the scene, European intellectuals and politicians had accepted the economic premise of Commu nism: the need to establish a state that would redistribute wealth from the rich to the poor. It was not some raving liberal or radical who created the modern system of compulsory welfare; it was the conservative German politician, Otto von Bismarck, who did so in the late 1870s.The common people rejoiced, just as Bismarck knew they would. Even today in Germany there are millions of common workers who still believe that Communism at least protected them and their jobs, despite their long-term poverty.

The ideal of the welfare state still is domi nant in the one society that experienced the nightmare of both National Socialism and International Socialism: Germany. oa:«I oa: ~« ~ 450 THE FREEMAN • NOVEMBER 1993 The Politics of "Fair Shares" When a politician speaks of everyone paying his fair share of taxes, he always means the rich should pay a higher percent age of income than the poor. Meanwhile, politicians offer to the middle class-the eligible voters who actually vote-their fair share of the loot that will be stolen from others by means of the ballot box. Almost no one questions the legitimacy of using the ballot box to confiscate the wealth of others. The debate centers around who should pay their fair share- ' 'someone else' ,-and those who will collect their fair share: "us." One question is never raised in public: What will be everyone's fair share of judg ment when the political theft process pro duces economic disaster and political revo lution? Everyone assumes that disaster can be deferred at least until after the next elec tion. Everyone assumes that the bills will come due later: "Someone else will have to pay them." But eventually, bills come due.

When they do, societies face their mo ment of truth. As Hayek says, the worst will then be ready to rise to the top. Blame will be placed, but on whom? On which groups? The politics of revenge will be the great temptation. The politics of envy will have a large constituency. At that point the remnant must be pre pared to announce the truth. What is the truth? In the words of cartoonist Walt Kel ley's Pogo Possum, "We have met the enemy, and he is us." This is simply an extension of Isaiah's prophetic observation: "All we like sheep have gone astray; we have turned everyone to his own way; and the LORD has laid on him the iniquity of us all" (Isaiah 53:6). This must be our confes sion before we blame the intellectuals and the politicians. The Culture of Spending The remnant faces a barrier to this truth in today's pre-crisis political economy. Those who are willing to say no to their fair share are few and far between, especially in the centers of political power. Those who insist on their fair share have the ear of Congress.

How did this happen? James L. Payne has offered a unique and powerful thesis to explain why this has happened. The reason why Congress con tinues to pass huge spending bills in the face of massive annual deficits, he says, is that Congressmen live in a nearly closed uni verse in which the vast majority of the people they talk to or hear from want them to spend tax dollars on specific projects. This closed universe is the culture of spending.1 Lobbyists in Washington rarely lobby against spending proposals. Constituents rarely write letters opposing specific spend ing proposals. Colleagues rarely organize major defenses against specific spending proposals. This even includes political lib erals who we might think would oppose almost all military spending. Hearing noth ing else, most politicians eventually learn to play their favorite instruments in this sym phony of spending. If this thesis is correct, Payne says, then the longer a politician stays in Washington, the more consistently he willvote for spend ing. He willbe assimilated into the culture of spending. Payne offers statistical evidence to show that this is exactly what happens.

Payne argues that the culture of spending rests on two assumptions: the presumption of government efficiency and the philan thropic fallacy. It is presumed by almost everyone that the civil government can and should use its monopolistic coercive powers to "make things better" by imposing nega tive sanctions (taxes) on certain groups in order to grant positive sanctions (benefits) to other groups. This is the underlying theoretical assumption of the politics of the fair share. Three-quarters of all government spend ing now goes to the purchase of personal goods and services that individuals could buy for themselves, not the purchase of usual public goods: police, courts, roads, etc. Citizens who oppose such wealth trans fers are regarded as opponents of the public good, when in fact they are merely trying to retain more of their own wealth to do for THE POLITICS OF THE "FAIR SHARE" 451 themselves what civil government plans to do for them, minus 50 percent for handling (approximately what it costs the govern ment to administer its programs).

Just about every special interest wants more spending. Politicians find ways to give this to them. The culture of spending rolls on. Writes Rupert Penmant-Rea, the retiring editor of the 150-year-old British weekly magazine, The Economist: "If lobbying has a shrine, it is in Washington, D.C. No self-respecting lobbyist can feel his career is fulfilled until he has made the pilgrimage there, and mastered the rites of the priest hood. There are about 80,000 lobbyists in Washington, twice as many as ten years ago. They even have their own American League of Lobbyists, which I hope is a deliberate parody. " But this phenomenon is not strictly Amer ican. "In all Western democracies," he says, "lobbying has long since become a mature industry." In early days, lobbyists asked for more specific spending and spe cific tax relief. But in the 1970s, everyone got into the game. Then the taxpayers started to complain. The politicians turned to borrowing and inflating the currency.

"More spending, more taxes, more borrow ing, more inflation: each stage of the se quence damaged general economic welfare while benefiting the organized rowdies." Today, he believes, the special interests are facing governments that have run out of resources. He predicts that governments will now turn to that age-old favorite: pro tectionism. 2 This will reduce almost every one's wealth. The False Morality of the Welfare State Every culture rests on moral presupposi tions. The culture of state spending rests on a false one: the widespread belief that the state is a morally legitimate instrument of coercive wealth redistribution. Until this moral presupposition is abandoned by most voters-a moral conversion which may have to be stimulated by the attention getting occurrence of national bankruptcy (deflationary or inflationary)-there are no believable technical solutions to the culture of spending. Technical political solutions are necessary but not sufficient for over coming the culture of spending, which is a religiously grounded viewpoint. This deeply religious impulse is made clear in Jack Douglas' monumental book, The Myth of the Welfare State, which should be a com panion volume to The Culture ofSpending.

In a society in which a majority of voters accept the role of the state as a source of wealth redistribution as morally valid, there will be widespread negative consequences. Politically, voluntary cooperation will be replaced by interest-group politics and the confiscation of private wealth. The worst will begin to rise to the top. This will eventually lead to an economic crisis and a loss of confidence in the prevailing social order. It is then that principled men must say no to the politics of the fair share. They must be ready to present both amoral critique of the culture of spending and a technical critique. It is not enough to show enraged, envy-driven voters that the welfare state has failed to deliver the goods. Voters must be reminded that their own false morality has led them into a crisis, and that repen tance-a change of mind-is necessary for social healing. The culture of spending must be shown to be the moral low ground, not just an inefficient solution to the problem of scarcity. D 1. See James L. Payne, The Culture of Spending (San Francisco: leS Press, 1991).

2. "An editor's farewell," The Economist (March 27, 1993), p. 17.