Clinton versus Cleveland; L. W. Reed

When more of the people's sustenance is exacted through the form of taxation than is necessary to meet the just obligations of government and the expense of its eco nomical administration, such exaction becomes ruthless extortion and a violation of the fundamental principles of a free government. No, unfortunately, Bill Clinton didn't say that-but how refreshing it would have been if he had! Another Democratic president of long ago, Grover Cleveland (who, ironically, got his start in politics in Buffalo) said it in his second annual message to Congress in December 1886. What Bill Clinton did say was this: "We could give it all back to you and hope you spend it right." He went on to say he wanted to keep the surplus for such government programs as Social Security, and he concluded by tossing a Lawrence Reed is president of the Mackinac Center for Public Policy (www.mackinac.org), afree market research and educational organization in Midland, Michigan, and chairman ofFEE's Board ofTrustees.

35 question back to the audience: "I want every parent here to look at the young people here and ask yourself, 'Do you really want to run the risk of squandering this surplus?' " Bill Clinton is not the only American pres ident who couldn't trust the people with their own money. Nor is Grover Cleveland the only president among the 41 we've had who want ed the people to keep more of what they earned. Clinton's audacious remarks harshly contrast with the perspective of another chief executive more recent than Cleveland: Calvin Coolidge. "Silent Cal" is one of my favorites and a man who would undoubtedly spurn Clinton as a mouthpiece for an arrogant, sta tist elite. Let me use this opportunity to share with readers what America's 30th president thought about taxes and the people who worked hard to pay them. "I want the people of America to be able to work less for the government and more for themselves," declared Coolidge in his inau gural address on March 4, 1925. "I want them to have the rewards of their own industry. That is the chief meaning of freedom. Until we can re-establish a condition under which the earn ings of the people can be kept by the people, we are bound to suffer a very distinct curtail ment of our liberty."

This flinty, frugal New Englander, who grew up respecting the hard-earned property of others, believed that the strength of the American nation was not centered in Wash ington, D.C. Once, as governor of Massachu setts, he asserted, "In a free republic a great government is the product of a great people.

36 THE FREEMAN/IDEASON LIBERTY • JULY 1999 They will look to themselves rather than gov ernment for success. The destiny, the great ness of America lies around the hearthstone. . . . Look well to the hearthstone; therein all hope for America lies." Bill Clinton has raised taxes in many forms, several times, and once called taxes "contri butions." As one wag put it, "Clinton never saw a tax he didn't like-and hike." Not Calvin Coolidge. As vice president, he strongly supported the steep reductions in income tax rates proposed by President War ren Harding's treasury secretary, Andrew Mellon. From the time he became president after Harding's untimely death in August 1923 until he left office in March 1929, Coolidge kept Mellon on the job and strengthened his own reputation as a commit ted tax cutter by urging Congress to enact further reductions. In the 1920s, the top income-tax rate fell from 73 percent to 24 percent. Americans with the lowest incomes benefited even more when the rate at the other end fell from 4 percent to one-half percent.

Between 1921 and 1929, the economy grew by nearly 60 percent, the national debt was reduced by a quarter, and the federal budget was consistently in the black. The depression that came later resulted not from tax cuts, but from unwise monetary policies of the Federal Reserve and destructive inter ventions by Congress, particularly in the years 1930-33. Moreover, Coolidge understood that people respond positively to incentives, and negative ly to disincentives. He knew that marginal rates of taxation made all the difference in the world in terms of economic behavior. In that sense, he was an early supply-sider-with an important difference. While today's supply siders support tax cuts as a means to increase government revenue, Coolidge wanted to leverage tax cuts into major spending reduc tions. Here's what he told an audience on Feb ruary 12, 1924: If we had a tax whereby on the first work ing day the government took 5 percent of your wages, on the second day 10 percent, on the third day 20 percent, on the fourth day 30 percent, on the fifth day 50 percent, and on the sixth day 60 percent, how many of you would continue to work on the last two days of the week? It is the same with capital. Surplus income will go into tax exempt securities. It will refuse to take the risk incidental to embarking in business.

This will raise the rate which established businesses will have to pay for new capital, and result in a marked increase in the cost of living. Coolidge told a press conference on Octo ber 11, 1927, that he and others "interested in tax reduction ought to be first of all bending their energies to see that no unwise expendi tures are authorized by the government, and that every possible effort is put forth to keep our expenditures down, and payoff our debt, so that we can have tax reduction." There was no Coolidge counterpart to Clinton's call for tens of billions of dollars of additional spending in his State of the Union speech last January. According to Americans for Tax Reform (ATR), the average family today pays more in taxes than it spends on food, clothing, shelter, and transportation combined. The Census Bureau reports that the average household pays $9,445 in federal income taxes alone twice what it paid just 14 years ago in 1985.

The federal tax code is made up of four huge volumes that are each thicker than the Bible, and the tax code is over seven million words long. And ATR reports that if Congress were to adopt the fiscal 2000 budget President Clinton proposed in January, federal bureau crats will spend more in one second ($56,000) than the average taxpayer earns in a year ($28,000). Where is Calvin Coolidge when we really need him?! D • Philosophy Spontaneous Order by Nigel Ashford "Many human institutions are the result of human action, but not of human design." -ADAM FERGUSON O rder has been a central preoccupation of political thinkers and philosophers throughout the ages. It is widely understood today as a state of harmony between people, or social peace. In the premodern era, howev er, the concept was understood as the mainte nance of a stable, hierarchical order that was pre-ordained by God or nature or both. Order can also be seen as the existence of regularity and predictability in human affairs, the absence of chaos. Although no longer associ ated with a rigid society ranked by privilege and power, the idea of order is still highly val ued. This is because it allows people with dif ferent interests and values to live together in society without resorting to discord, conflict, or civil war. This is the modern idea of spon taneous order.