Inscrutable Follies; S. Richman

-AYN RAND, The Fountainhead P ardon if I sound like a character out of Dostoyevsky, but is it a sign I am mad when I am unable to understand what should be a simple newspaper article about taxing and spending in Washington? A New York Times article on January 15 began: "The Clinton administration plans to propose a federal tax increase of 55 cents a pack on cigarettes to help pay for new domes tic and military spending programs, White House and congressional officials said on Thursday." The tax increase is estimated to yield $8 billion a year.Tax revenues have been rising 8 percent a year since 1992, but that's not enough for the people who spend our money for us. That sentence was followed two paragraphs later by this: "The presidenthas not announced how he intends to pay for these programs, promising that the details would be provided in the budget he submits to Congress on Feb. 1. But the White House has long signaled its intention to seek more money from tobacco, and officials confirmeda report in the Wall Street Journal on Thursday that Clinton will propose the tobacco tax, which is now at 24 cents, as part of a package of tax increases and loophole-closings that it intends to push to pay for new programs."

Sheldon Richman is editor a/The Freeman. 43 I guess a distinction can be made between "White House officials" saying something and a presidential announcement to the same effect. In Washington the trial balloon is a common device for testing the reaction to proposals before anyone is publicly commit ted to them. It makes sense to use trial bal loons, considering all the surplus hot air they have there. Nevertheless, this is unnecessarily confus ing. Does Clinton favor raising tobacco taxes to pay for new government spending or not? Of course he does. The Times goes on to say: "Clinton plans to discuss in the State of the Union address next week his administration's efforts to reduce smoking by teenagers, including the proposed tax increase to make cigarettes too expensive for some potential smokers." Here we go again. Is the tax supposed to raise money or isn't it? If it discourages smoking, how can it finance new spending?

The administration won't say, and the reporters don't even bother to point that prob lem out. They accept the contradictions and pass them along to us, assuming we won't notice. Incidentally, if it's so terrible for tobacco companies to profit off people's lethal habits, why isn't it just as terrible for politicians to do so?

44 THE FREEMAN/IDEAS ON LIBERTY • APRIL 1999 The article then broadens its focus from tobacco to the budget in general: "Despite growing federal budget surpluses-Clinton announced earlier this month that the govern ment would take in at least $76 billion more than it spends this year-the administration has been forced to scramble to come up with money to pay for a long list of initiatives that it will include in the budget proposal it will send to Congress." Translation: The government can never have enough money. Reports of the death of big government have been greatly exaggerat ed. And by the way, if you exclude the Social Security accounts, there is no surplus. The budget will be in deficit at least through 2001. The surplus is the result of the onerous FICA tax (for Social Security and Medi care), which exceeds 14 percent and is applied to more and more of our income each year. The proceeds not needed to pay retirees are used for general government spending. In a couple of decades, with the retirement of the baby boomers, that surplus will turn into a deficit.

The Times explained that "the administra tion is the victim of its own success" in that Clinton and the Republicans agreed to protect the surplus pending a solution to the coming Social Security bankruptcy. "Moreover," added the Times, "both Congress and the administration remain bound by budget rules that presumed the government would always run deficits." The Times implied the agreement not to touch the Social Security surplus was kept. Not so, as the astute James Glassman pointed out: "last year we got a good demonstration of what politicians of both parties do with a sur plus. They spend it-often on pork-barrel projects such as the highway bill or on subsi dies to favored groups such as farmers.... In his State of the Union address [in 1998], Pres ident Clinton said he would reserve 'every penny of any surplus' for Social Security. Instead, joining with Republicans, he boosted federal spending by an extra $20 billion, get ting around budget rules by calling the new outlays an 'emergency.'" In other words, they lied-well, misled us.

The Times and Glassman both mentioned the budget rules. They deserve some attention. From the Times story: "Those rules impose tight spending caps...." Obviously not tight enough if new spending can be exempted merely by labeling it "emer gency." Nevertheless, the Times informed us that "The spending caps for next year are about $30 billion less than Congress would need to pay for all current programs-never mind any new ones [!]-and politically palat able sources of new revenue are scarce." So the budgeters should be cutting spend ing, right? Guess again. The rules, continued the Times, "require that any tax cuts or credits be offset by corre sponding tax increases." Come again? All tax cuts must be offset by tax increases? This is where I really begin to feel I'm in the Twilight Zone. Who came up with these rules? Do they take us for fools? The state giveth, the state taketh away-simultaneously.

One more passage from the Times article: "In addition to the tobacco tax, Clinton plans to include a number of other proposals to close corporate tax loopholes or otherwise squeeze more revenue from the tax system, even though Republicans routinely denounce them as dead on arrival. But in the end, the proposals allow Clinton to say he is submit ting a balanced budget that sets out his policy agenda." "Closing tax loopholes" is a euphemism for raising taxes. Business, goes the old saw, doesn't pay taxes; it collects them. Thus, we are to be imposed on further by the govern ment's voracious appetite for revenue. But we won't notice. And the budget will be in bal ance-if you hold the mirrors at just the right angle. Government goes to great lengths to shroud its activities, and the national media are part ners in the crime. They may focus on scandal and undo a rogue from time to time. But essentially they are conspirators in the build ing and maintenance of the consensus inter ventionist government requires.

Making sense of what government is up to is wearisome, which is the point. The propri etors of the budget don't want us looking over their shoulders. What shepherd ever wanted advice from his flock? D James F. Lincoln: IndustrialPeacemaker by Daniel Hager T he dichotomy between labor and manage ment does not actually exist. Enlightened self-interest eliminates contentious factional ism in employment relations. Unfortunately, government has intervened in the workplace to convert it into a battleground and to institu tionalize coercive conduct that is akin to war fare. The victims are consumers and the entire American economy. Those were the views of an industrialist named James F. Lincoln. He applied what he termed "incentive management" in building the Lincoln Electric Co. of Cleveland, Ohio, into the world's largest manufacturer of arc welding equipment. Lincoln Electric was a provider of top-quality products at prices that undercut the competition. Nevertheless, it paid its workers at about twice the average wages in the overall industrial sector and weathered the New Deal.