Cato Policy Report (volume 20, number 5) · The proposed tax cuts, as in the 1997 budget deal, are...

PolicyReportSeptember/October 1998 Vol. XX No. 5

b y T y l e r C o w e n

The “culture wars” and recent debatesover the National Endowment for theArts reflect deep disagreements aboutthe health of contemporary culture.

The current wave of cultural pessimism,expressed in various forms by both the leftand the right, suggests that our culture isexperiencing corruption and decline. The leftconcludes that government support for thearts is needed, while the right often favorsgovernment support for traditional culture.But a review of the evidence offers strongreasons for cultural optimism and confidencethat a modern commercial society willstimulate artistic creativity and diversity.

The music of Bach, Mozart, Haydn, andBeethoven is more accessible to today’s lis-teners than it was to the listeners of the 18thor 19th centuries. Modern concertgoers cansample an unparalleled range of musical peri-ods, instruments, and styles. Even relative-ly obscure composers have their materialstocked in music superstores, which are com-mon in both American cities and suburbs. Asmall Tower Records outlet will offer at least10,000 classical music titles, and the largestTower branch in Manhattan has over 22,000titles. The Naxos label markets excellent per-formances of the classics for as little as $5.99for 70 minutes of music. Music of all kinds—both old and new—is available in great pro-fusion.

Movies, including many silents, can berented on videocassette very cheaply, or onlaser disks for those who want higher qual-ity picture and sound. Modern video stores,run on a private for-profit basis, are librariesfull of classic works.

New and definitive editions of many lit-erary works, or better translations, are pub-

lished regularly. The Bible and Plato, twofavorites of many cultural pessimists, con-tinue to be reissued in new editions, whilethe classics are available in cheap paperback.Television, video stores, and bookstores givemodern fans better access to the works ofShakespeare than the Elizabethans had.

Literacy and reading are two areas wherethe modern world comes in for especiallyharsh criticism, but even here the trendsare largely positive. Between 1970 and 1990the measured world literacy rate for adultsrose from 61.5 to 73.5 percent. The indus-trialized countries increased their literacy ratefrom 93.8 to 96.7 percent over that period.American illiteracy was far worse 100 yearsago or even in the middle of this century.Consistent with those trends, the averageAmerican buys more than twice as manybooks today as in 1947. The number of book-stores has jumped nearly 10-fold, and their

Is Our Culture in Decline?

Niskanen on Social Security 2David Kelley deconstructs“welfare rights” in new book 3Gingrich et al. on capital gains 6The costs of U.S. foreign policy 9Coming events in New York,Philadelphia, San Jose 9Is Social Security good for women? 13How to silence science 15

In This Issue

Yeutter at trade conference, p. 9

Tyler Cowen is a professor of economics atGeorge Mason University and the author ofIn Praise of Commercial Culture (HarvardUniversity Press, 1998). Continued on page 10

Speaker of the House Newt Gingrich leaves the Cato Institute after keynoting a Cato Policy Forum,“Should We Lower the Capital Gains Tax?” on July 16. Other speakers included Congressional BudgetOffice director June O’Neill and Joseph Minarik of the Office of Management and Budget.

33214_CATO 9/14/01 12:46 PM

Chairman’s Message

2 • Cato Policy Report September/October 1998

As of early August, Congress had yetto approve a budget resolution forthe fiscal year beginning in October.The major disagreement, primarily

between House and Senate Republicans,was what to do with the growing surplusin the unified budget, now projected tobe about $1.55 trillion over the next 10years.

At that time, House Republicans seemedcommitted to approving some combina-tion of tax cuts that would reduce rev-enues by about $700 billion over that peri-od. Although the budget resolution itself

will not approve specific tax cuts, those most favored by the Repub-lican leadership include reducing the marriage penalty, the capitalgains tax rate, and the tax on Social Security benefits and eliminat-ing the estate tax. There is no obviouscoherence in this proposed combinationof tax cuts other than that they wouldespecially benefit the Republicans’ mid-dle- to upper-income constituency. Anyremaining surplus, which would reducethe explicit federal debt, was describedby House Majority Leader Dick Armeyas “a big, big step in the direction of sav-ing Social Security.”

In late July the Senate Republicanleadership endorsed a proposal devel-oped by Senate Budget Committee chair-man Pete Domenici and Sen. Phil Grammto commit almost all of the projected surplus in the unified bud-get to purchase a portfolio of investment-grade short-term corpo-rate debt instruments, a portfolio that would be selected andmanaged by the Federal Reserve Bank of New York. This propos-al would have the political effect of building a temporary wallagainst tax cuts until Congress approves the necessary reform ofSocial Security. In a strident editorial the Wall Street Journal describedthis proposal as “Domenici-Gramm Socialism,” and the SenateRepublican leadership backed away from the proposal by the endof the day.

Neither of these proposals, of course, directly addresses the futureof Social Security. The House Republican proposal, however, wouldmake it more difficult to make the necessary reform of Social Secu-rity—requiring a larger reduction of future Social Security benefitsor other government spending, larger payroll or other federal tax-es on the working generation, or a larger federal debt burden onfuture generations. The House Republicans’ proposal, in addition,may be politically dumb—making them vulnerable, once again, toa charge that they are sacrificing the future of Social Security on thealtar of current tax cuts. The Senate proposal, in contrast, buys ayear or two to consider the necessary reform of Social Security and,in the meantime, develops a small fund that would later be distrib-uted to private retirement accounts.

The case for the House Republican budget proposal, I suggest,is weakened by the following considerations:

1. The proposed tax cuts, as in the 1997 budget deal, are a mish-mash of junk tax cuts—not a major tax reform that would at leastprovide interesting competition to Social Security reform.2. Federal tax cuts, by themselves, reallocate the burden of taxa-tion among people and over time but do not reduce the size of thefederal government. As a founder of the National Tax LimitationCommittee, I have supported tax cuts in states with a balanced-bud-get rule, because the reduction in tax revenues forces a correspondingreduction in state spending. With no constitutional balanced-bud-get rule at the federal level, however, a reduction in federal tax rev-enues has not generally led to a corresponding reduction in federalspending. Republican fiscal policy would be much more coherent ifits makers recognized that the dominant political issue of the day is,“It’s the size of government, stupid!” This does not rule out mak-

ing an issue of tax policy,but it suggests that a majortax reform should be eitherrevenue neutral or combinedwith a corresponding reduc-tion in federal spending.3. The time is right for amajor reform of Social Secu-rity. The earlier the prob-lems of Social Security areresolved, the better. Thepotential transition to a sys-tem of pre-funded privateretirement accounts is the

most important opportunity to reduce the size of the federal gov-ernment in many decades.

President Clinton is unusually well informed about this issue,is committed to a major reform by the end of his term, and seemsto favor some amount of money in some type of private retirementaccount. The fact that Clinton favors a policy, of course, does notmake it right. Nor does it make it wrong. In this case, I suggestthat President Clinton is right. Lock up the projected budget sur-plus until this issue is resolved. Save Social Security first. Seize theday!

Once More with Passion: Save Social Security!

—William A. Niskanen

❝ The potential transition to asystem of pre-funded privateretirement accounts is the mostimportant opportunity to reducethe size of the federal govern-ment in many decades.❞

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September/October 1998 Cato Policy Report • 3

David Kelley subjects the institutions ofthe contemporary welfare state tosustained criticism in a new book fromthe Cato Institute, A Life of One’s

Own: Individual Rights and the WelfareState. The book is a strong refutation of theflawed concept of “welfare rights.” Itcombines empirical evidence of the welfarestate’s effects on behavior, historical researchon the origins of the welfare state (and onwhat it displaced), and philosophicalclarification of such core ideas as freedomand rights. After a careful examination ofthe various arguments made on behalf ofwelfare rights, Kelley concludes that “theconcept of welfare rights is invalid.”

Kelley distinguishes between statutoryrights, constitutional rights, and human rights.Although current law creates statutory rightsto welfare benefits, Kelley demonstrates thatthere are neither constitutional nor humanrights to welfare. As he notes, “Just as theidea of a constitutional right to welfare isat odds with the Founders’ legal conceptionof the function of government, so the ideaof a basic human right to welfare is at oddswith the Founders’ philosophical conceptionof the rights of the individual. Welfare rightsare radically different from, and incompat-ible with, the classical rights to life, liberty,and property.”

Kelley traces the emergence of the wel-fare state to the combination of two factors:on the one hand, “real problems, of whichthe two most important were continuingpoverty among those left behind by economic

progress and the new forms of economic riskthat arose as the economic fortunes of indi-viduals became bound up with national andinternational markets” under industrial cap-italism and, on the other hand, “intellectu-al and cultural trends [that] were increasinglyhostile to individualism and capitalism.” Thefirst factors were being addressed “by pri-vate, voluntary organizations well before gov-ernment programs were conceived and enact-ed” and were rapidly being ameliorated. Kel-ley directly addresses the intellectual chal-lenge to individualism and capitalism.

A Life of One’s Own has drawn muchpraise. Alex Kozinski, Judge of the U.S. NinthCircuit, says, “A Life of One’s Own is aprovocative, often devastating, critique ofthe central assumptions of the welfare state.Kelley reminds us that our country was found-ed on individual freedom and responsibili-ty, not a coercive obligation to provide forothers. At a time when many people are com-ing to the realization that our welfare sys-tem needs to be overhauled, it is increas-ingly important to question the system’s cen-tral premises. Kelley accepts that challenge,exposing a system based on faulty assump-tions and lacking incentives for personalresponsibility.” Randy Barnett of the BostonUniversity School of Law calls the book “abrilliant mix of theory and practice, a bookyou will share with your friends.” Philoso-pher Douglas Rasmussen of St. John’s Uni-versity says, “Kelley shows ‘welfare’ rightsto be both an ethical and an economic sham.Kelley argues that individualism is at odds

with neithermorality norcommunity.This is a clear-ly writtenbook thatappeals toc o m m o ns e n s e . ”And Rep.Ed Royce(R-Calif.)w r i t e s ,“David Kelley pro-vides us with a moral compass thatpoints the way out of the current welfare sys-tem. A Life of One’s Own reaffirms and setson solid philosophical ground the traditionalAmerican principles of personal responsi-bility and individual liberty with human dig-nity for all. I found it both convincing andinspiring.” The book has its own Web site(www.individualrights.org) and is beingpromoted through an extensive campaign ofprint advertising.

Kelley, a former professor of philosophyand the author of a widely used college text-book on logic, The Art of Reasoning, as wellas other works in philosophy, and has beena frequent contributor to Barron’s, Harper’s,other popular magazines, and academic jour-nals. He is currently executive director of theInstitute for Objectivist Studies.

A Life of One’s Own can be purchasedfor $9.95 (paper) or $18.95 (cloth) by call-ing 1-800-767-1241. ■

Cato Books

Rep. Ed Royce: “A moral compass”

Kelley Invalidates “Welfare Rights”

Cato Policy Report is a bimonthly review published by the CatoInstitute and sent to all contributors. It is indexed in PAIS Bulletin.Single issues are $2.00 a copy. ISSN: 0743-605X. ©1998 by theCato Institute.•Correspondence should be addressed to CatoPolicy Report, 1000 Massachusetts Ave., N.W., Washington, D.C.20001. • INTERNET: [email protected] •WEB SITE: http://www.cato.org

CATO POLICY REPORTDavid Boaz ....................................................................... EditorDavid Lampo ...................................................Managing EditorMarian J. Council .....................................................Art DirectorRyan Oprea ...................................................Editorial Assistant

CATO INSTITUTEWilliam A. Niskanen ...................................................ChairmanEdward H. Crane..........................................President and CEODavid Boaz..........................................Executive Vice PresidentRobert N. Borens..........................................V. P., DevelopmentTed Galen Carpenter ...V. P., Defense & Foreign Policy StudiesJames A. Dorn .......................................V. P., Academic AffairsWilliam Erickson ................V. P., Finance and AdministrationPatrick S. Korten ...................................V. P., Communications

Virginia Anderson....................Manager, Information ServicesDoug Bandow .......................................................Senior FellowDiana Brady....................................Director of AdministrationGary Dempsey.........................................Foreign Policy AnalystIvan Eland ..............................Director, Defense Policy StudiesMichael Gough...................Director, Science and Risk StudiesDaniel Griswold....Assoc. Dir., Center for Trade Policy StudiesJennifer Grossman ..........................Director, Education PolicyEdward L. Hudgins .......................Director, Regulatory StudiesElizabeth W. Kaplan...................................................CopyeditorM. Christine Klein ..........................Director, Sponsor RelationsDavid Lampo ...........................................Publications DirectorRobert A. Levy................Senior Fellow, Constitutional StudiesBrink Lindsey...........Director, Center for Trade Policy StudiesAaron Lukas...............................................Trade Policy AnalystTimothy Lynch ...............Asst. Director, Constitutional StudiesDerrick Max ...............................Director, Government AffairsStephen Moore...........................Director, Fiscal Policy StudiesDarcy Olsen ...................................Entitlements Policy AnalystTom G. Palmer ...............................Director of Special ProjectsAlan Peterson.......................Director of Computer OperationsRoger Pilon ..........Director, Center for Constitutional StudiesJacobo Rodriguez ......Asst. Director, Global Economic Liberty

Solveig Singleton........................Director, Information StudiesDean Stansel ..............................................Fiscal Policy AnalystMichael Tanner ..............Director, Health and Welfare StudiesJerry Taylor........................Director, Natural Resource StudiesPeter VanDoren ............Asst. Director, Environmental StudiesIan Vásquez ........................Director, Global Economic LibertyJulia Williams........................................Director, Public Affairs

James M. Buchanan......................Distinguished Senior FellowEarl C. Ravenal..............................Distinguished Senior Fellow

James Bovard.......................................Associate Policy AnalystBarbara Conry ......................................Associate Policy AnalystPeter J. Ferrara ....................................Associate Policy AnalystLawrence Gasman...........Senior Fellow in TelecommunicationsPatrick J. Michaels ....Senior Fellow in Environmental StudiesGerald P. O’Driscoll Jr. .........................................Senior FellowP. J. O’Rourke ..................................Mencken Research FellowTim Penny..................................Fellow in Fiscal Policy StudiesJosé Piñera..................Co-chair, Social Security PrivatizationJim Powell.............................................................Senior FellowTeller ................................................Mencken Research FellowCathy Young .................................................Research Associate

33214_CATO 9/14/01 12:46 PM

Cato Events


♦ June 1: The Department of Defense iscurrently designing or building three newtactical fighter aircraft at a total projectedcost of more than $300 billion. At a PolicyForum on “Tactical Fighters: Too ManyAircraft, Too Little Money,” retired ViceAdm. Robert Dunn of the U.S. Navy andretired Maj. Gen. Charles D. Link of the AirForce both implied that funds for any onetactical aircraft program cannot be cut at theexpense of the others. Lane Pierrot of theCongressional Budget Office, WilliamsonMurray of the Smithsonian Institution, andDavid Ruppe of Defense Week questionedthe need for those new fighters.

♦June 11–14: Members of Cato Club 200gathered at the Lake Placid Lodge in NewYork for their second annual retreat. Speakersincluded publisher Steve Forbes, broadcasterJohn Stossel, and Iris Chang, author of TheRape of Nanking. Several Cato policydirectors discussed their current projects withCato’s major supporters as well.

♦ June 17: On May 11, 1998, Indiaconducted five underground nuclear tests.Pakistan followed suit two weeks later.NATO condemned the tests, and the Clintonadministration quickly imposed sanctions onIndia and Pakistan. Naresh Chandra, theIndian ambassador, defended his country’sactions at a Policy Forum titled “After theTests: What’s Next?” arguing that Indiaconducted its tests to demonstrate itsdefensive capabilities to the internationalcommunity. Ted Galen Carpenter, Cato’s vicepresident for defense and foreign policystudies, commented.

♦June 8: Author Tamar Jacoby discussed herbook Someone Else’s House: America’sUnfinished Struggle for Integration at a BookForum. In her book, Jacoby argues thatAmericans have given up Martin LutherKing’s dream of a racially integratedcommunity and have, instead, settled for atolerant coexistence. Columnist and talk-show host Armstrong Williams argued thatracial preference programs have served toexacerbate racial tensions.

♦June 23: Do trade sanctions do damage todomestic business? Does the government have

a constitutional right to restrict the exporta-tion of goods, such as encryption and nucleartechnology, which have both civilian andmilitary uses? Those and other issues werediscussed by panelists at an all-day conferenceon “Collateral Damage: The Economic Costof U.S. Foreign Policy.” The keynote speakerwas Richard Cheney, CEO of HalliburtonNUS Corp. and former secretary of defense.Other speakers included former U.S. traderepresentative Clayton Yeutter, GaryHufbauer of the Council on ForeignRelations, and Carl Ellison of CyberCash.

♦June 25: David Rabban, professor of lawat the University of Texas, discussed his bookFree Speech in Its Forgotten Years at a BookForum. Conventional wisdom has it that thedefense of free speech began with the effortsof Oliver Wendell Holmes, Louis Brandeis,and the American Civil Liberties Unionduring World War I, but Rabban argued thatclassical liberals had been defending freespeech since at least the Civil War. He furthernoted that the Progressive movement washostile to free speech until its own rank andfile began to be persecuted for opposingAmerica’s involvement in World War I.Robert Corn-Revere of Hogan & Hartsonheartily endorsed Rabban’s work.

♦ June 30: In recent years the FederalCommunications Commission has increasedits efforts to shut down unlicensed, low-powered radio broadcasting stations.Regulators argue that microbroadcasters runthe danger of causing anarchy on theairwaves. At a Policy Forum on “Micro-broadcasting and the War for the Airwaves,”Jesse Walker of the Competitive EnterpriseInstitute, Scott Bullock of the Institute forJustice, and Pete triDish, a microbroadcaster,argued that microbroadcasting—or piratebroadcasting, as critics call it—gives voiceto a diversity of viewpoints and fulfills thepromise of the First Amendment.

♦ July 2–5: A Cato University Seminar oneconomics and history was held in SanDiego. Speakers included Russell Roberts ofthe John M. Olin School of Business atWashington University in St. Louis; StephenDavies, professor of history at ManchesterUniversity; Timothy Lynch, associate director

of Cato’s Center for Constitutional Studies;and James K. Glassman, syndicatedcolumnist for the Washington Post.

♦ July 9: At “Save the Kids? Or Grab theMoney? What’s Driving the Tobacco Wars?”a Policy Forum, four speakers discussed thelegitimacy of tobacco legislation andlitigation. Sen. John Ashcroft (R-Mo.)contended that the defeated McCain billwould have constituted a massive growth ingovernment and would have unfairly taxedthe American people. Political consultantDick Morris argued that the McCain billwould have cut teen smoking. John P. Coaleargued that the June 1997 settlement, whichhe helped negotiate, was fair to the tobaccoindustry. Cato Institute senior fellow inconstitutional studies Robert A. Levy arguedthat the federal government has noconstitutional right or reason to interferewith the tobacco industry at all and that theway to curb teen smoking is to crack downon stores that sell to minors.

♦ July 15: Francisco Thoumi, author ofPolitical Economy and Illegal Drugs inColombia, and Sidney Weintraub of theAmericas Program at the Center for Strategicand International Studies discussed “TheDrug War’s Impact on Latin AmericanSocieties” at a Policy Forum. The speakersexplained that Washington’s hemisphericwar on drugs has been a failure because ithas caused tremendous social and economicdamage in Latin America withoutdiminishing drug production or trafficking.Thoumi described how the drug warundermines civil society in Colombia, andWeintraub called for an end to Washington’sannual certification process.

♦ July 16: At a Policy Forum on “ThePromise and Perils of the ProposedInternational Criminal Court” four panelistsdiscussed the proposed UN treatyestablishing a permanent InternationalCriminal Court. The court would prosecutepersons charged with “the most seriouscrimes of concern to the internationalcommunity.” Stephen Rickard of AmnestyInternational and Morton Halperin of theTwentieth Century Fund argued that the ICCwould be a serious deterrent to war crimes,

Dick Morris backs McCain

The U.S. in Kosovo, Colombia–and in Court

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crimes against humanity, and genocide.Attorney Lee Casey and former assistantsecretary of state John Bolton argued thatparticipating in the court is unconstitutional,that the court poses serious threats to nationalsovereignty, and that it would not have astrong effect on international crime.

♦July 16: Eight distinguished speakers metat a Cato Institute Policy Forum to addressthe question, “Should We Lower the CapitalGains Tax?” Speaker of the House NewtGingrich gave the keynote address, arguingthat lowering the tax would represent aserious boon to the economy. Stephen Entinof the Institute for Research on theEconomics of Taxation; Kenneth Kies ofPrice Waterhouse; and June O’Neill, directorof the Congressional Budget Office, lookedat what effect a change in the capital gainstax would have on realizations and revenues.

Mark Bloomfield of the American Councilfor Capital Formation, Iris Lav of the Centeron Budget and Policy Priorities, and JosephMinarik of the Office of Management andBudget discussed the optimal form of thecapital gains tax. Lawrence Kudlow ofAmerican Skandia gave the luncheon speech,“America’s New Investor Class.”

♦July 21: Philosopher David Schmidtz of theUniversity of Arizona discussed “SocialWelfare and Individual Responsibility” ata Book Forum. The book, which he wrotewith philosopher Robert E. Goodin ofAustralian National University, is a debateon the ethical merits of collectiveresponsibility for welfare. Schmidtz notedthat all Americans have experiencedincreasing prosperity since the beginning ofthis century. He also stated that self-help andmutual aid groups among the poor have been

far more effective than governmental welfareprograms. Schmidt’s argument was critiquedfrom the left by Jamin B. Raskin of theAmerican University and from the right byAdam Wolfson of the Public Interest.

♦July 23: NATO defense planners are nowdrawing up a list of options, including airstrikes, for military intervention in Serbia’sKosovo province. Cato senior fellow DougBandow, Cato foreign policy analyst GaryDempsey, and syndicated columnist StefanHalper spoke about their recent trip to theregion at a Policy Briefing on “Kosovo: AView from the Ground.” Dempsey highlight-ed the negative effects of the Clinton admin-istration’s siding with the Serbian govern-ment. Halper said that the conflict needs tobe contained and the only possibly helpfulthing NATO might do would be to deploytroops along the Kosovo-Albania andKosovo-Macedonia borders to stop the flowof arms to the embattled province. Bandowargued that there were no political pressurepoints that could be used by the United Statesto prevent what he believes is an inevitableconflict.

♦ July 23: The Cato Institute held a CitySeminar in Albuquerque on “A New Dealfor Social Security: Public Policy for the 21stCentury.” Speakers included Gary Johnson,Republican governor of New Mexico;Edward H. Crane, president of the CatoInstitute; former congressman Tim Penny(D-Minn.); and Michael Tanner, director ofthe Cato Institute Project on Social SecurityPrivatization.

♦July 28: Journalist Paul Ciotti discussed hisCato Policy Analysis, “Money and SchoolPerformance: Lessons from the Kansas CityDesegregation Experiment,” at a breakfastfor education reformers.

♦July 30: At a Policy Forum titled “Shouldthe United States Adopt a Code of Conductfor Selling Arms?” Gregory Suchan of theU.S. Department of State said that a unifiedcode of conduct was unnecessary since theexecutive branch already has its own code.Stephen Rickard of Amnesty InternationalUSA contended that a code would reducehuman rights abuses in nondemocratic andbellicose states. Joel Johnson of AerospaceIndustries Association argued that a codewas unnecessary, given internal restraint bythe industry and present regulation.Lawrence Korb of the Brookings Institutioncontended that a code would enhanceAmerica’s “moral authority” abroad. ■

Murray Weidenbaum, former chairman of the Council of Economic Advisers, lis-tens as Dan Griswold, associate director of Cato’s Center for Trade Policy Stud-ies, testifies before the Senate Finance Committee on the trade deficit.

Political consultantDick Morris, Cato

senior fellow RobertLevy, and tobacco

negotiator John Coalelisten as Sen. John

Ashcroft (R-Mo.)denounces proposedtobacco legislation.

CBO director JuneO’Neill discusses capital

gains taxes.

Iris Chang, author ofThe Rape of Nanking,addresses Cato sup-

porters at the annualCato Club 200 retreat in

Lake Placid, New York.

Above: Indian ambas-sador Naresh Chandradiscusses nuclear test-

ing at a Cato PolicyForum.

33214_CATO 9/14/01 12:46 PM


Policy Forum

On July 16, 1998, the Cato Institute held aPolicy Forum, “Should We Lower the Cap-ital Gains Tax?” Among the speakers wereNewt Gingrich, Speaker of the House; Ken-neth Kies, a partner in the Washington officeof Price Waterhouse who was formally withthe Joint Committee on Taxation; andLawrence Kudlow, chief economist withAmerican Skandia. Excerpts from theirremarks follow.

Newt Gingrich: Central to the debate, not justfor the United States, but for the future ofthe world, is the question, Does statism workor does free enterprise work? Everywhere onthe planet the issue is the same. Human free-dom is tied to private property rights, the ruleof law, free enterprise, technological advance,and the idea that free people pursuing newideas to create wealth is the most powerfulway to raise the standard of living.

I was recently in a conversation with Ger-man and British parliamentarians. They gotto talking about computers and how to makesure that poor people get them. I said thatthe real answer is economic growth. Theystared at me like I’d lost my mind becausethat is such a non-European idea. I said that99 percent of American homes have televi-sions and 97 percent have telephones—becauseour society is so much wealthier than itwas 100 years ago. The answer to Dickens’sBleak House was economic growth andthe encouragement of entrepreneurial inno-vation. This is a sophisticated model that nomajor political figure, with the singular excep-tions of Jack Kemp and Ronald Reagan, hasbeen able to explain. It’s the center of whatthis debate is about. Frankly, if some of ourfriends on the left want to argue against eco-nomic growth, against technological change,against general prosperity, we should allowthem to do so. But I believe that the averageAmerican actually gets the idea.

When we were sworn in in January 1995the budgets for the next 11 years—1995through 2005—were going to have a com-bined deficit of $3,140,000,000,000. Theprojection that came out of the CongressionalBudget Office yesterday is that over the next11 years, 1998 through 2008, the budget sur-plus will be $1,600,000,000,000. That is,over a 10-year period, a swing of $4 trillion.

That’s real change. The elite media don’t

want to cover it. This is a different society.We’re moving in a different direction. We’vereestablished the work ethic instead of vic-timization. We’ve reestablished the right toentrepreneurship, which is Ronald Reagan’sbig domestic contribution. And we are mov-ing toward a system that takes advantage ofthe information age and the world market.

It is in that context that I introducedmy bill, which would create more econom-ic growth. The Economic Growth Act of1998 is effective as of the date introduced,June 24. It would cut the capital gains taxrate to 15 percent. Now I agree with SteveMoore and Alan Greenspan that the correctrate is zero if you want maximum econom-ic growth. If you really wanted the mostwealth created over the next 20 years, youwould have a zero rate for the capital gainstax, which is a tax on job creation. But even15 percent would be down from the currentrate of 20 percent, which we reduced lastyear from 28 percent. The rate for those whoare in the lower income tax bracket wouldgo down from 10 percent to 7.5 percent. Andof course this would be a simplified rate; wewould eliminate the exception categoriesof real estate, depreciation recapture, col-lectibles, and gains from small business stocks.So we think this is a very powerful step inthe right direction.

Our core message is very simple: Cuttingthe capital gains tax rate helps anyone whois preparing for retirement, starting a busi-ness, saving for college tuition, or planningto buy a house. The lower the capital gainstax rate, the better off society is.

We believe there’s $11 trillion of locked-in capital. What we want to do is increasethe velocity with which people move frominvestments that are less productive to invest-ments that are more productive. We want tolower the risk of investing in the next 30 newideas that are Microsoft or Merck or Pfizeror Intel, because that’s the way you acceler-ate growth.

So, our challenge here is to liberate thatmoney so it can move to better investments.Humans change their behavior, and there’sno area in which it’s easier to change yourbehavior than capital gains, because if thetax goes up you just don’t sell. You see thisvery dramatically if you look at 1985–86when there was a preemptive sale of assets

to get ahead of the increase in capital gainstaxes. People made sure they sold theircapital prior to the tax going into effect inorder to escape the higher tax rate, whichthen led to a dramatic drop in the total num-ber of capital sales the year after the tax wentinto effect.

In 1978–79 we lowered the tax on cap-ital gains, and a lot more people sold theircapital and moved it to a better, more pro-ductive place. In 1981–82, even in the mid-dle of a recession, people sold more of theircapital because the rate went down. And in1986–87 when the rate went up, we sawprobably the largest recorded drop in capi-tal sales ever. And all we’re saying here is thatwhen you lower the tax on selling capital,more people sell capital. And when you raisethe tax, fewer people sell. And if you liber-ate capital and it moves to more produc-tive investments, it has to increase econom-ic growth.

When people sell capital, the sale repre-sents unlocking money to go from a less pro-ductive investment to a more productiveinvestment so that the general economy growsfaster. Why do you have Microsoft produc-ing Windows? Because somebody somewheretook a gamble that Bill Gates wasn’t nutswhen he dropped out of college. You know,lots of Europeans and Asians come to us andsay, gee, how can we get our governmentto do that? The answer is you can’t. We needto be much clearer about this. Bureaucraciesdon’t make those kinds of gambles. And theycertainly don’t make them work.

In January 1997 the baseline estimatewas that there would be $205 billion of netcapital sales last year. The CongressionalBudget Office then adjusted it for our taxbill to $256 billion, and then in January 1998to $382 billion. The difference between $205billion and $382 billion is fairly significant.I would argue that there were two big thingsgoing on: The first is that we were changingthe nature of the American political econo-my. Reforming welfare, balancing the bud-get, saving Medicare without a FICA taxincrease, having less regulation, having theinitial securities litigation bill pass and theveto overridden, all those were sending pro-free-market pro-growth signals that werepositive. Second, in 1995 we had begun push-ing the capital gains tax cut. People were

Should We Lower the Capital Gains Tax?

33214_CATO 9/14/01 12:46 PM


beginning to realize their capital much more.But the key is that their behavior, which haschanged fairly dramatically, has some veryreal revenue effects.

So, we want to reduce the maximum rateto 15 percent on our way to zero. We wantto unlock $11 trillion of unrealized capitalgains. We believe that unlocking relates direct-ly to the tax rate. And we want to suggestthat if you look at both the direct revenuesand the indirect revenues, you have a health-ier economy with a greater rate of innova-tion, with more entrepreneurs founding newcompanies, with a greater chance to lead theworld market at the high end of the productvalue scale.

Lawrence Kudlow: One of the key influenceson American politics in the next few yearswill be the emergence as a political force ofinvestors with a desire to keep Washingtonon a tight free-market leash. One of the mostinteresting political questions in recent yearswas why the Democratic Congress was boot-ed out of office in 1994, a year when theeconomy was growing at close to 4 percentin real terms. The rule of thumb for politicsis that 3 percent or better economic growthtends to favor the incumbent.

I would argue that one of the reasons1994 was so anomalous was that the finan-cial markets behaved very poorly. Interestrates went from 5.75 to 8.25 percent, and70 percent of the companies listed on theNew York Stock Exchange lost at least 20percent of their value, a kind of silent bearmarket. The tax rate increases of the prioryear, the attempts to nationalize health care,and other Clinton cabinet trial balloons sug-gesting the emergence of a European-typeindustrial policy mobilized for the firsttime the full strength and power of what Icall the new investor class. Those are peoplewho have given up on the Social SecurityAdministration’s ability to generate retire-ment wealth and decided in the 1980s and1990s to take matters into their own hands,to exercise personal responsibility, andgenerate their own investment portfolios.Polling data from Robert Teeter and PeterHart suggest that 43 percent of all Ameri-cans own shares. A second poll done for theWall Street Journal suggests that 51 per-cent of the population own at least $5,000

worth of shares. In rough terms, that’s 120million people, just a little bit less than theentire working population of 130 million.

That number doubled once in the 1980sand again in the 1990s. Forty-nine percentof the newest investors, those who boughtshares in the 1990s, are women. Thirty-eightpercent are nonprofessional, salaried work-ers. The typical new investor earns less than$75,000 a year. Some 65 million people haveinvested more than $5 trillion in mutualfunds. Roughly 25 million people have invest-ed slightly more than $1 trillion in 401(k)s.And another 32 million people have invest-ed some $700 billion in tax-deferred vari-able annuities. Yes, there’s overlap, but thoseare very impressive numbers. What’s more,those people are long-term investors. Theyhave survived the 1987 crash and the bearmarkets of 1990 and 1994, the nasty 10 per-cent corrections in July 1996 and October1997, and they’re hanging on through theAsian crisis. Eighty percent told Teeter-Hartthat they would keep their investments if themarket declined 20 percent or more.

Most important, those investors are peo-ple who have learned from their own successand their own perseverance that free mar-kets, not governments, create wealth. Theyare more than willing to exercise their ownjudgement, their own responsibility, and whatI think is a profound act of self-government.They’ll accept the risk of short-term losses.But as long-term investors, they recognizethat the basic trends of the American econ-omy and the American stock market havereally been upward since the country wasfounded and certainly over the last 100 years.

If you took the protracted period from1970 to 1997, which includes a bear mar-ket from 1970 to 1982 and a bull marketfrom 1982 to 1997, somebody who invest-ed $5,000 a year every year in the top 25percent of mutual funds would have beensitting on $1.4 million in 1997. That num-ber, $5,000 a year, is a very interesting num-ber because it is just slightly more than theaverage Social Security contribution, whichis now about $3,600 a year.

This group of people, which I might char-acterize as “retail” rather than professionalinvestors, is extremely well informed. Theyuse stockbrokers and financial planners. Theyhave accountants and lawyers. They watchCNBC, Bloomberg, and other news shows.They’re operating on the Internet. They don’tneed or want the federal nanny state to assistthem. And it really is a profound sense ofself-government that we are watching in thisrevolutionary way of investing.

Again, using 1994 as the first example,this group of people does not want the heavyhand of government regulating, or taxing, orinflating, or directing our resources. Theybelieve now, on the evidence of their ownmonthly accounting statements showing therise in wealth, that private markets and pri-vate companies do it best. In 1994 there wasa sense that the Republicans were offeringan alternative policy of taxing and regulat-ing, and the new investors voted for it. In1996, I believe, the investor class was respon-sible for the shift in President Clinton’spolicies. In 1995 and 1996 he essentially ranfor reelection as a moderate Republican. AndI believe that this class of investors, whichis even bigger than the American Associationof Retired Persons and the teachers’ unions,is going to be a profound force in Americanpolitics for years to come. The politicalparty that tells the voters in unequivocal termsthat it will use the growing budgetary sur-plus to reform and simplify the tax code;reduce the tax burden; and reform SocialSecurity, health care, and education by allow-ing and permitting individuals to make theprincipal choices is going to prosper in thenext decade or so. The investor class will keepthe government on a short, free-market leash.

New numbers from the CongressionalBudget Office suggest cumulative surpluses

Continued on page 8

Lawrence Kudlow: “The investor class will keep thegovernment on a short, free-market leash.”

❝ I agree with Steve Moore and Alan Greenspan that the correctcapital gains tax rate is zero if you want maximum economic growth.❞

—Newt Gingrich

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of $580 billion through the year 2003. That’sup from $150 billion in a CBO report dat-ed March 1998. But the long-term estimatesof that office are still too cautious. It’s stillpredicting a 2.1 percent real economic growthrate, and I expect it to be 3 percent or better.

The CBO basically says that the sourcesof unexpected income and the unexpected-ly strong revenue flows are a mystery. Theanalysts say they just don’t understand it andtherefore don’t know whether it will con-tinue. Which makes sense in their case becausethey didn’t expect it and would never havebelieved it in the first place. So if you don’tbuy it, you don’t expect it to continue becauseit doesn’t exist. I would offer a modest sug-gestion about the source of this income andrevenue: it’s called prosperity and wealth cre-ation. In the past 15 years this nation hasimproved its economic policies. We’ve hadlower tax rates, lower inflation rates, lowerinterest rates. Many industries have beenderegulated. Our currency is strong. We’reessentially the freest trading nation in theworld. And of course, one of the wonderfulstories in the last 15–16 years is the rise ofAmerican entrepreneurs, men and womenwho have reinvented the economy throughthe greatest surge in technological innovationsince the last quarter of the 19th century.

The productivity-enhancing benefits oftechnological innovation and investment havebeen increasing growth, profits, output, jobs,and, yes, the tax revenues of the federal gov-ernment. Revenues are rising, and tax brack-et creep is rising. That’s what a progressivesystem produces during periods of prosper-ity. Why the CBO refuses to acknowledgethat is beyond me.

The bottom line is this: I would stick withmy estimate of significantly higher budgetarysurpluses in the next five years. If I’m right,we have a great opportunity to undertakethe reforms necessary to make our healthyeconomy even healthier, to make our com-petitive economy even more competitive. Thetax system ought to be streamlined. The ratesshould be brought down. We could live withone or two or three brackets, but we suredon’t need five or six. And though I believethat lower tax rates will produce more taxrevenues through improved economic growth

rates, if in the short run revenue falls, wehave plenty of resources to cover that. In apinch, we could even cut spending.

Second, we need to reform Social Secu-rity. In particular, I think we need to improvesavings rates among the middle and lowermiddle income classes by reducing payrolltax rates and then moving those investmentsinto market vehicles. That is what the investorclass wants to do. And I tell you, if this Repub-lican Congress doesn’t make that possible,the investor class stands ready to act, notonly as investors, not only as taxpayers, butas voters. They are the invisible hand drivingpolitics today, which is a good reason to beoptimistic.

Kenneth Kies: The capital gains tax issue is asmuch about theology as it is about economics.People who feel strongly about what theythink about capital gains, feel very stronglyabout it. And there are people on all sides ofthis debate. There are those who adamant-ly believe the rate should be zero. There areprobably more who think the rate ought tobe the same as the rate for all other income.Robert McIntyre of the Center on Budgetand Policy Priorities designed a so-called flatincome tax that actually had five marginalrates and was introduced by Rep. RichardGephardt. McIntyre was candid about whatit would do. He was asked if it would raisetaxes on higher incomes. And he said yes, itwould. But those people have been “the ben-eficiaries of life’s lottery.” Apparently, any-body who makes money just hit the lottery,in his view.

One thing I learned at the Joint Com-mittee on Taxation is that how you cutcapital gains matters. For instance, from timeto time, people have put forward proposalsthat would cut capital gains tax rates onlyfor regular tax purposes and not for alter-native minimum tax purposes. That is kindof a bad joke because most people would bepushed into the AMT. That problem is goingto become even more pronounced over thenext 10 years. We are going to witness amigration of taxpayers from the regulartax into the AMT because the AMT exemp-tion amount of $45,000 is not indexed forinflation. That is a huge problem indepen-dent of what is done to capital gains becausemuch of this growth is going to occur at rel-

atively modest income levels, in the $50,000to $75,000 and $75,000 to $100,000 expand-ed income classes.

I’ll just give you one example to showyou how important this problem is. By theyear 2005, a family of four that has $58,300of gross income in 1996 dollars, does notitemize their deductions, and has no prefer-ences will be subject to the AMT. Those peo-ple will not get the joke.

Politically, I think the whole debate oncapital gains is behind the times by about 15years. Two big things have happened since1980. The number of taxpayers who have acapital gain has dramatically risen. There arenow, I believe, 20 million taxpayers who havea capital gain. Five million of them are in the15 percent tax bracket. Five million of themare over age 65. That profile will only increaseover time. The capital gain issue really hasbecome a middle-class issue, but much of therhetoric has not caught up with that fact.

Also a Congressional Budget Office reportlast May analyzed the benefits of indexing.It broke out capital gains in 1994 by expand-ed income class. And then it looked at eachincome class separately, at people who earned$0–$10,000, $10,000–$20,000, $20,000–$30,000, and so on. It recalculated in theaggregate what the gain or loss would havebeen had the basis been indexed for infla-tion, to eliminate inflationary gain. In everyincome class below $200,000, the net resultwas a capital loss. Taxpayers with incomesbelow $200,000 were paying, in the aggre-gate, capital gains tax on illusory gains.

Only in the over-$200,000 income classwas there real gain. The report suggested thathigher income people are more likely to owngrowth stocks, are more likely to be risk tak-ers. People in lower income classes are morelikely to hold dividend-paying stocks becausethey use them for current income. That’s par-ticularly true of people over age 65. So thosepeople are the ones most likely to find, whenthey actually sell a capital asset and pay a tax,that they are paying tax on gains that are onlyinflationary, not real economic gain.

I think that part of this debate is goingto get more and more attention because ithighlights how the current capital gains taxunfairly taxes people—especially retired andmiddle-class people—on apparent gains thatoften aren’t real economic gains. ■

CAPITAL GAINS Continued from page 7

❝ Taxpayers with incomes below $200,000 were payingcapital gains tax on illusory gains.❞

—Kenneth Kies

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The arguments against aninterventionist American foreignpolicy are many. One that is oftenforgotten is the fact that

American foreign policy can bedevastating to the economy. Aproliferation of trade sanctions, securitymeasures affecting the importation orexportation of technology andinformation, and restrictions oninvestment and financial practices allhave potentially devastating effects onthe U.S. economy. The Cato Instituteheld a day-long conference on“Collateral Damage: The EconomicCost of U.S. Foreign Policy” to discussthose issues.

A major theme of the conferencewas that trade sanctions have seriouseffects on the business environment.Several speakers argued that tradesanctions make American businessesunreliable traders and partners, andconsequently make American busi-nesses unappealing trade partners.“People will not even approach insome cases an American producerbecause there’s a fear that later on they mighthave to withdraw due to sanctions,” saidGeorge Mason University law professorWilliam H. Lash III.

Gary Hufbauer of the Council on For-eign Relation and the Institute for Interna-tional Economics noted that, in addition tomaking it difficult for American companiesto compete in the global marketplace, uni-lateral sanctions rarely—if ever—work. What’s

worse, several speakers noted that the use oftrade sanctions has increased dramaticallyin recent years. Ian Butterfield of Westing-house said, “Both parties have gone sanc-tions crazy,” noting that over 50 percent ofall trade sanctions put into place in this cen-tury have been instituted during the last sixyears.

Butterfield also spoke of the use of sanc-tions to prevent the export of technology

to other nations. When the United Statesimposed sanctions to prevent Ameri-can businesses from exporting non-military nuclear technology to China,the sanctions had no effect on China’sability to acquire nuclear technology;instead, they barred U.S. companiesfrom competing in Chinese energy mar-kets. “No nuclear supplier nation fol-lowed the U.S. position,” he said. “Con-sequently the U.S. has been denyingvendors access to the Chinese market.French, Canadian, and Russian ven-dors have all been pushing their prod-ucts.”

Ken Bass, a partner in the law firmof Venable, Baetjer, Howard & Civilet-ti, discussed the dangers and difficul-ties of regulating cryptographic tech-nology. Eric Hughes of Simple Accessand Carl Ellison of CyberCash talkedabout digital cash and its implicationsfor international trade. William C. Laneof Caterpillar, Inc., testified to the dev-astating effects of trade sanctions onhis own business and told the storyof his company’s campaign against

international trade regulations. Former sec-retary of agriculture and U.S. trade repre-sentative Clayton Yeutter said that by impos-ing trade regulations we are “shootingourselves in the foot” and concluded that“as a nation we simply need to get our acttogether.”

Papers from the conference will be pub-lished in a book titled Economic Casualtiesin early 1999. ■

Former secretary of defense Richard B. Cheney tells participantsin Cato’s conference “Collateral Damage: The Economic Cost ofU.S. Foreign Policy” that trade and investment by U.S. companiesare highly effective in promoting democracy and human rightsabroad, while trade sanctions almost never work.

Cato Calendar

Money in the New Millennium:The Global Financial Architecture

16th Annual Monetary ConferenceWashington • Cato Institute • October 22, 1998

Speakers include Lawrence H. Summers, William Poole, JeffreySachs, Robert Mundell, Alan Reynolds, and Steve Hanke.

Liberty in the New MillenniumPhiladelphia • The Rittenhouse • October 27, 1998

Speakers include Steve Hanke, Roger Pilon, and José Piñera.

A Life of One’s Own: Individual Rights and the Welfare StateWashington • Cato Institute • November 10, 1998

Speakers include David Kelley.

Cato Conferences

Foreign Policy Can Damage Economy, PrivacyTrade sanctions and encryption rules explored at conference

Liberty in the New MillenniumNew York • Waldorf Astoria • November 12, 1998

Speakers include Edward H. Crane.

Washington, D.C., vs. Silicon Valley 2nd Annual Conference on Technology and Society

Cosponsored with Forbes ASAPSan Jose • Fairmont Hotel • November 19–21, 1998

Speakers include Milton Friedman, Scott Cook, Eric Schmidt,T. J. Rodgers, William Melton, and Lawrence Ellison.

Eleventh Annual Benefactor SummitCabo San Lucas, Mexico • Melia Los Cabos

February 17–19, 1999

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average size has increased dramatically. Booksuperstores are now commonplace.

Contrary to many claims, television andthe Internet are not killing the book. Theprinted word offers unique modes of story-telling and analysis that other media havenot replaced. Television and the Internet oftencomplement reading and stimulate readerinterest in books, instead of replacing them.Today a wide variety of talented writers isactively publishing and transcending tradi-tional genre boundaries.

Art museums and art museum attendanceare booming. Blockbuster art exhibitionstravel the world and bring great paintings toincreasing numbers of viewers. Earlier in thiscentury, most Americans outside New Yorkhad few means of viewing high-quality art.Art publishing is doing well; even minorpainters now have published catalogs full ofhigh-quality color plates.

Live performance of the arts has flour-ished as well. From 1965 to 1990 Americagrew from having 58 symphony orchestrasto having nearly 300, from 27 opera com-panies to more than 150, and from 22 non-profit regional theaters to 500. Contempo-rary Western culture, especially in the Unit-ed States, is flourishing.

Markets Spur InnovationThe market economy continually spurs newartistic innovations. Arguing the worth ofparticular contemporary creations is moredifficult, given the tendencies for disagree-ment about the culture of the present day(Mozart was controversial in his time, butfew dispute his merits today). Modern cre-ators, however, have offered many deep andlasting creations, which are universal in theirscope and significant in their import. Thosecreations delight and enrich large numbersof intelligent fans and influence subsequentartists. We can fully expect many modernand contemporary works to stand the testof time, just as earlier works have, even ifwe cannot identify exactly which ones.

The most impressive creations of con-temporary culture include cinema, rock ‘n’roll, Pop Art and Minimalism, modern dance,jazz, genre fiction, and the modern biogra-phy, to give but a few examples. The sky-

lines of Manhattan, Chicago, and Hong Kongwere financed and designed almost entirelyby the private sector. The exact contents ofa list of important contemporary creationswill vary with taste, but our culture providesa wide variety of styles, aesthetics, and moods.An individual need not have a very particu-lar set of preferences to love contemporarycreations. The 20th century is not only theage of intellectual, atonal music, it is also theage of Buddy Holly and Steven Spielberg,both life-affirming and celebratory creators.

New musical genres continue to blossom.Our century has seen the development ofblues, soul, rhythm and blues, jazz, ragtime,swing, rock, country and western, rap, andbluegrass, as well as more recent forms ofelectronic music. Some of the most signifi-cant modern artists are still around, playingand recording for our enjoyment. We canhear Bob Dylan and the Rolling Stones inconcert, still in good form, even if not at theiryouthful peak.

Film is the art of the 20th century, parexcellence. It combines drama, music, andhigh technology to entertain and inspire largeaudiences. Moviegoers all around the worldwant to see American films. Some moviebuffs complain that “they don’t make ‘emlike they used to,” but the best Americanfilms of the last 20 years—my list wouldinclude The Thin Blue Line, Blue Velvet,Basic Instinct, Schindler’s List, DangerousLiaisons, L.A. Confidential, Titanic, and TheTruman Show—belie that opinion. (The view-er who disagrees with my list will have notrouble coming up with his or her ownfavorites.) Art movies and independent filmsshow continued vitality.

New or newly deregulated technologiesare likely to induce further cultural innova-tions. Cable television is expanding rapidlyand breaking down the hegemony of the net-works. Eventually viewers will be able tochoose from hundreds of channels. Cablealready offers the world’s greatest movies;the modern drama of sporting events; largedoses of popular music; and high arts suchas ballet, theater, and classical music. View-ers can take a class in Shakespeare withoutleaving their living rooms or use foreign-lan-guage channels to learn languages, therebyenlarging their access to the world’s cultur-al treasures.

Cable is not the only new artistic medi-um. We can only guess at the developmentof the Web, Virtual Reality technologies, andHypertext, both as means for delivering old-er creations and as new media for futureworks.

Finally, quasi-artistic activities are blos-soming like never before. Fashion, decora-tion, cuisine, sports, product design, com-puter graphics, and commercial art—to givejust a few examples—continue to flourishand grow. As recently as 20 years ago, Thaifood was not available in most Americancities; now Thai restaurants dot the suburbsas well. Although those fields are not art inthe narrow sense, they bring beauty and dra-ma into our lives. A beautifully decoratedhome or a luxurious shopping mall delightsus and appeals to our aesthetic sense. Thequestion “What is art?” has become lessmeaningful with the growing diversity ofcapitalist production.

Markets and Contemporary CultureIt is no accident that contemporary culturehas flourished in our wealthy society. Mostof the great cultural movements of the past—those of Athens, Rome, early China, theIslamic empire, the Italian Renaissance, and19th-century Europe—like 20th-centurymodernism, occurred in societies that wererelatively wealthy and commercial for theirtime. Today, most important works in film,music, literature, painting, and sculpture aresold as commodities. Contemporary art iscapitalist art, and the history of art has beena history of the struggle to establish markets.

Creators have the best chance of livingfrom their work in a wealthy, capitalist soci-ety. Both artists and audiences have moreleisure time and are freed from tiresome phys-ical labor. The larger size of the market sup-ports a greater diversity of products, in bothartistic and nonartistic realms. Not surpris-ingly, the number of individuals who workas full-time creators has risen steadily forcenturies.

Capitalism increases the independence ofthe artist from the immediate demands of theculture-consuming public. The wealth of amarket economy funds alternative sources offinancial support, such as private founda-tions, universities, bequests from wealthy rel-atives, and day jobs. Those sources of fund-

CULTURE Continued from page 1

❝ The music of Bach, Mozart, Haydn, and Beethovenis more accessible to today’s listeners than it was to the

listeners of the 18th or 19th centuries.❞

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❝ Most of the cultural movements of the past occurred insocieties that were relatively wealthy and commercial.❞

ing allow artists to invest in skills, undertakelong-term projects, and control their fate.Ironically, artists who care about art, ratherthan money, have the best chance in a systembased on money and commercial incentives.

Wealthy societies give artists the greatestchance of financial independence and thuscreative independence. Beethoven wrote,“I am not out to be a musical usurer as youthink, who writes only to become rich, byno means! Yet, I love an independent life,and this I cannot have without a small income.”In other cases, income also allows artists topurchase the materials necessary for artis-tic creation, such as paint and canvas or, inthe case of Damien Hirst, sharks and formalde-hyde.

We should not disapprove of artists whoproduce for money. The painters and sculp-tors of the Italian Renaissance were busi-nessmen who produced for profit and nego-tiated hard bargains. Mozart wrote, “Believeme, my sole purpose is to make as muchmoney as possible; for after good health it isthe best thing to have.” Capitalism allowsartists to commercialize their product andsell to large numbers, if they so wish, there-by mobilizing greed in the service of creativity.

Finally, many arts depend on the tech-nological innovations delivered by capital-ism. We take paper for granted, but in ear-lier eras its expense significantly limited theoutput of both writers and artists. Photog-raphy, cinema, and electronic reproductionof music were not possible until relativelyrecent times. Advances in medicine allowartists to live to older ages, and birth controlallows many female creators to manage theircareers more effectively.

The economist William J. Baumol hasargued that the performing arts suffer froma “cost disease” because they do not enjoythe benefits of technical progress as much asother industries do. Baumol notes that it took40 minutes of work to produce a Mozartstring quartet in 1780, and it still would take40 minutes today. Baumol, however, under-estimates the progressive nature of artisticproduction. Electronic reproduction, in theforms of recording and radio, has improvedthe productivity of musicians by allowingthem to reach larger audiences. Today’s stringquartet travels by airplane rather than bystagecoach or train. A string quartet in 1780

could play Mozart, but today’s string quar-tet can play Beethoven, Bartok, and the Bea-tles’ “Eleanor Rigby” as well.

Cultural Pessimism and Its Appeal Many cultural commentators take explicit-ly pessimistic views. Neo-Marxists and crit-ics of mass culture, such as the FrankfurtSchool, believe that markets degrade culture.In their view, the commodification of culturelowers artistic quality and corrupts artists.They identify market culture with the pro-duction of low-quality television programsfor the masses. The influence of that view,of course, has extended well beyond the rad-ical left. Many neoliberal writers share theconcerns of the Frankfurt School, even thoughtheir politics are far more moderate. NeilPostman argues that modern technology andmedia are destroying literacy. Herbert Schillertitled his book Culture, Inc.: The CorporateTakeover of Public Expression.

The political correctness movement iden-tifies capitalistic culture with the suppressionof minorities and women. Some multicul-turalists argue that market exchange leadsto a globalized, homogenized culture of theleast common denominator. Marshall McLuhanwrote of the “global village,” in which weall consume the same products. In responseto those fears, cultural protectionism is prac-ticed around the world, especially in coun-tries such as France and Canada that fearAmerican influence. No American repre-sentative was invited to the recent Ottawaconference on cultural protectionism, on theostensible grounds that America has no cab-inet-level culture minister—which is one rea-son why American culture has proven so for-midable.

On the right, many neoconservativesbelieve that our culture is in a sorry state, asa reflection of more general trends of per-missiveness, crime, and loss of respect fortradition. Allan Bloom, Daniel Bell, IrvingKristol, and Robert Bork have all written cri-tiques of culture under capitalism. They arguethat capitalistic culture gives insufficient sup-port to traditional values.

Yet Western culture has been on an upswingsince at least the year 1000. Both innovationand preservation of the past have blossomed.Why then has cultural pessimism had somuch influence?

Cognitive biases induce observers to grantcultural pessimism more plausibility than itdeserves. The pessimists focus on the declineof what they already appreciate, and neglectthe rise of what is yet to come. It is easy toperceive the loss of what we know and hard-er to discern new developments and surprises.Even if long-term trends are positive, culturemay appear to be deteriorating.

Observers often judge present cultureagainst the very best of past culture, causingthe present to appear lacking in contrast. Butcomparing the best of the past against theentirety of the present is unfair. No matterhow vital contemporary culture may be, ourfavorite novels, movies, and recordings werenot all produced just yesterday. Anyone’sfavorite epochs, including those of the cul-tural optimist, will lie at some point in thepast. As a result, each field will appear tohave declined, given that some superior eralies behind us in each case. Yet we shouldnot conclude that creativity is drying up orslowing down. Rather, the past contains moreaccumulated achievement than does any sin-gle moment in time, such as the present. Fur-thermore, cultural pessimism will appearincreasingly persuasive, precisely because theworld continues to produce creative works.With every passing year, the entire past con-tains an increasing amount of culture, rela-tive to the present.

We also consume contemporary cultureless efficiently than we consume the cultureof the past. Eighteenth-century music criticsdid not commonly understand that Haydnand Mozart were categorically superior toGluck, Cherubini, Cimarosa, and Gretry.Years of debate and listening were neededfor the truth to become obvious. Similarly,we cannot yet identify the truly worthyand seminal performers in modern popularmusic or contemporary art. It takes decades,and sometimes even centuries, to separatethe cultural wheat from the chaff.

Most great creators, even those who nowstrike us as conservative, faced considerableopposition in their day. The French Impres-sionists were rejected by the artistic main-stream of their day and considered ridicu-lously unstructured. Mozart’s music was con-sidered incredibly dissonant by many of hiscontemporaries. One critic charged Anton

Continued on page 12

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Bruckner with being “the greatest living musi-cal peril, a tonal Antichrist . . . [who] com-poses nothing but high treason, revolutionand murder . . . poisoned with the sulphurof Hell.”

Older audiences often cannot appreciatenew and innovative cultural products. Manyindividuals devote their maximum attentionto culture in their youth. Between the agesof 15 and 25, for instance, the mind is recep-tive to new influences, individ-uals are searching for their iden-tity, and, more often than not,they are rebelling against theirelders. For many individuals,those years are a formative peri-od for cultural taste. Over time,however, marriage, children, andjobs crowd out the opportuni-ty to discover new products.Therefore, in the eyes of manyindividuals, culture appears tobe drying up and declining, whichcreates yet further support forpessimism.

Some individuals hold pes-simistic attitudes to support theirelitism. Elitists need to feel thatthey belong to a privileged minor-ity. Contemporary culture, how-ever, is massive in size, diversein scope, and widely dissemi-nated. Elitists have a hard timesustaining their self-images ifthey admit that our culture iswonderful and vibrant. Cele-brating the dynamism of mod-ern creations ascribes aestheticvirtues and insights to a verylarge class of artistic producers and con-sumers—contra elitism.

The diversity of modern culture impliesthat much trash will be produced, providingfodder for pessimism and elitism. We shouldkeep these low-quality outputs in perspec-tive and view them as a luxury that onlydiverse and wealthy societies can afford.

Some kinds of cultural pessimism springfrom lack of imagination. Cultural pessimismand “resource pessimism” share commonroots in this regard. Resource pessimism is

the view, effectively criticized by Julian Simon,that the world will run out of resources inthe near future. Resource pessimists focuson one kind of resource, such as oil, andsee only so many years’ supply remaining.They fail to see that the world could procureenergy by different means in the future. Manycultural pessimists hold analogous attitudes.The West has developed certain great artforms, such as epic poetry, classical drama,and the symphony. Those forms have been“exhausted,” at least in terms of the taste ofthe pessimist, implying cultural decline. Yet

we should not look for cultural innovationto recur in the same areas over time; if any-thing, we should expect the exact opposite.There is no 20th-century Homer or Aeschy-lus, but we do have Alfred Hitchcock, DukeEllington, and Frank Lloyd Wright.

Cultural pessimism has been around aslong as culture. Pessimistic attacks have beenleveled for centuries, although the target haschanged frequently. Many moralists andphilosophers, including Plato, criticized the-ater and poetry for their corrupting influ-

ence. Books became a target after the onsetof publishing. Eighteenth-century pessimistsaccused novels of preventing readers fromthinking, preaching disobedience to parents(note the contradictory charges), undermin-ing women’s sense of subservience, breakingdown class distinctions, and making readerssick. Libraries, especially privately run cir-culating libraries, were another target. EdwardMangin remarked in 1808, “There is scarce-ly a street of the metropolis, or a village inthe country, in which a circulating librarymay not be found: nor is there a corner of

the empire, where the Englishlanguage is understood, that hasnot suffered from the effectsof this institution.”

In the 18th and 19th cen-turies the targets included epis-tolary romances, newspapers,opera, the music hall, photog-raphy, and instrumental virtu-osi, such as Liszt and Paganini.The 20th century brought thescapegoats of radio, movies,modern art, professional sports,the automobile, television, rhythmand blues, rock ‘n’ roll, comicbooks, MTV music videos, andrap music. Each new mediumor genre has been accused ofcorrupting youth and promot-ing excess sensuality, politicalsubversion, and moral relativism.

My version of cultural opti-mism offers a contrasting per-spective. Capitalist art consistsfundamentally of bringing theconsumer and producer togeth-er. Therein lies its exhilarating,challenging, and poetic nature.Marketplace art is about the

meeting of minds and hearts. We should notdeplore our culture, as do the pessimists.Rather, we should recognize its fundamen-tally capitalist nature, which implies cre-ativity, entertainment, innovation, and aboveall diversity. ■

Novelist Mario Vargas Llosa and Cato’s Ian Vásquez were among the speak-ers at a conference celebrating the 10th anniversary of the Fundacion Lib-ertad in Rosario, Argentina, on June 4–5.

CULTURE Continued from page 11

❝ Cultural pessimism will appear increasingly persuasive. With everypassing year, the entire past contains an increasing

amount of culture, relative to the present.❞

To order, call 1-800-767-1241

BRING AMERICA’SFREE-MARKET LEADERS TO YOUR HOME

33214_CATO 9/14/01 12:46 PM


Virtually all women would be better off(many significantly) under a system ofindividually owned, privately investedaccounts than under the current Social

Security system,” according to a new CatoInstitute study of the impact of severalapproaches to Social Security privatizationon women. In “Benefits of Social SecurityPrivatization for Women” (Social SecurityPaper no. 12), Ekaterina Shirley and PeterSpiegler, graduates of the John F. KennedySchool of Government at Harvard University,compared benefits for women under SocialSecurity, under a partially privatized“double-decker” or two-tiered system,and under a fully privatized system withprovisions for earnings sharing by marriedcouples. The authors found that for eachof eight types of women in today’sworkforce, whether they had full orinterrupted earnings histories, “the FPES[full privatization with earnings sharing]plan with contribution rates of 10 percentor 7 percent delivers the highest amountof retirement benefits on a present valuebasis.” In “Greater Financial Security forWomen with Personal RetirementAccounts” (Briefing Paper no. 38), a user-friendly paper based on the Shirley-Spiegler study, Darcy Ann Olsen writesthat women suffer from the disparateimpact of the Social Security system’s benefitrules and would be considerably better offunder a system of privately owned retirementaccounts. The system’s current benefit ruleshave a significant impact, especially the“dual-entitlement” rule, which frequentlyresults in a working woman’s receivingbenefits based only on her husband’searnings. Such a woman “receives no creditor benefits based on the payroll taxes she haspaid.” Another frequent result of the rule isthat “a couple with two breadwinners mayget fewer benefits than a couple with onebreadwinner and identical lifetime earnings.”

♦International Criminal Court WouldThreaten RightsIn “Reasonable Doubt: The Case against theProposed International Criminal Court”(Policy Analysis no. 311), Cato foreign policyanalyst Gary T. Dempsey notes that “itappears that many of the legal safeguardsAmericans enjoy under the Bill of Rights

would be unavailable if Americans werebrought before the International CriminalCourt” proposed by the United Nations.Dempsey says that the draft ICC treaty doesnot recognize such fundamental protectionsas the Fifth Amendment’s promise of dueprocess or protection against self-incrim-ination, or the Sixth Amendment’s right totrial by jury. He also points out that theexisting UN war crimes tribunal onYugoslavia does not recognize any rightagainst self-incrimination or the right toconfront one’s accusers.

♦Free Trade and Human Rights“The best policy for promoting freedom andhuman rights remains economic and moralengagement,” the Rev. Robert Sirico writesin a new Trade Briefing Paper from the CatoInstitute’s Center for Trade Policy Studies.With Congress considering whether tocontinue China’s most favored nation (MFN)trade status, Sirico reminds Christianconservatives that “trading with a countryis not the same thing as placing a moralimprimatur on the government of thatcountry.” In “Free Trade and Human Rights:The Moral Case for Engagement” (TradeBriefing Paper no. 2), Sirico, a Catholic priestwho heads the Acton Institute for the Studyof Religion and Liberty, argues that thesituation in China is a “far more complexreality” than opponents of MFN statusrealize. “Members of the American businesscommunity who frequently deal withChina—among them Christians who devotetheir lives to serving others through economic

endeavors—are dismayed at what is beingwritten and said by some conservativeChristians involved in the debate. Aneconomic miracle is taking place—a historicchance that the Chinese people will be madepermanently free to pursue their individualdreams.”

♦Fans of “Japan, Inc.” Turn Out to HaveBeen Dead WrongPurveyors of the “Japan, Inc.” economicmodel, who “argued in the late 1980s andearly 1990s that the United States could not

compete with Japan’s unique form ofstate-directed insider capitalism . . . weredead wrong, both in their assessment ofthe Japanese ‘threat’ and in theirrecommendations for U.S. policy.” Theirprophecies of doom, and the realities thatproved them wrong, are described indetail in a new Cato Institute study. In“Revisiting the ‘Revisionists’: The Riseand Fall of the Japanese Model” (TradePolicy Analysis no. 3), Brink Lindsey andAaron Lukas of the Cato Institute’s Centerfor Trade Policy Studies examine thefawning praise, dire predictions, andpolicy prescriptions of such well-knownanalysts of Japan, Inc. as ChalmersJohnson, Clyde Prestowitz, James Fallows,and Karel van Wolferen. The study

concludes that the failure of the revisioniststo see the flaws in the Japanese model is easilyunderstood. “All their errors trace back toa common source: an inability to understandand appreciate the power of free markets.”

♦No New Telecom Taxes“Universal service regulation poses a threatto the stated goals of the supporters ofuniversal service, namely the developmentof an advanced communications infra-structure for the United States,” writesLawrence Gasman in “The New Telecom-munications Entitlement and Taxes” (PolicyAnalysis no. 310). Gasman, a senior fellowat the Cato Institute, notes that legislatorsdebating universal service provisions of theTelecommunications Act of 1996 “barelyaddressed whether there is a real need forany universal service subsidies” for schoolsand rural areas. There is not. In the study,Gasman examines the social, economic, andpolitical justifications for the program and

Cato Studies

Free trade promotes human rights

Social Security Is Especially Bad for Women

Darcy Olsen discusses the impact of Social Security priva-tization on women at a Capitol Hill forum.

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News Notes

Dorn Wins Faculty Award

concludes that “universal service subsidiesare not justified by economics, by anyreasonable principle of justice, or by commonsense.”

♦Cuts in Theater Missile Defense Are Needed“Acquiring all the systems in the currenttheater missile defense (TMD) program isunnecessary,” writes Charles V. Peña in“Theater Missile Defense: A LimitedCapability Is Needed” (Policy Analysis no.309). “The United States should purchaseonly those systems that support a nationalsecurity policy of sending U.S. expeditionaryforces to foreign theaters only when vitalU.S. national security interests are at stake.”Doing so would reduce the cost of theprogram from an estimated $47.3 billion to$17.4 billion, the study finds. Peña, anindependent defense policy consultant, arguesthat “it is no longer reasonable or rationalfor the United States to maintain forward-deployed forces throughout the world andprovide protection for friends and allies.”He concludes, “Our military forces should

be designed to support a more selective andrigorous national security policy. And ourtheater ballistic missile defense choices mustprovide real military capability and beconsistent with our policies and forces.”

♦The Myth of the 2.2 Percent SolutionPartisans of the current Social Security systemsometimes argue that raising the payroll taxby a “mere” 2.2 percent would suffice tosolve the program’s financial problems. Buta new study titled “The Myth of the 2.2Percent Solution” (Social Security Paper no.11) concludes that the “2.2 percent solution”not only would exact a huge cost—$75billion in higher taxes in the first year alone—but would still require an additional tax hikeevery year to keep the trust funds in balance.In the study, economists Neil Howe andRichard Jackson point out that the proposalis designed to deal with one particularmeasure used to determine Social Security’sfiscal health: actuarial balance. Computationsof actuarial balance count surpluses in theprogram’s trust funds as genuine savings,“but the trust funds contain nothing but astack of Treasury IOUs that will require

additional taxes or borrowing from thepublic to redeem. The more accurate measureof Social Security’s health is the program’soperating balance—that is, its earmarkedannual tax revenues minus its annualoutlays,” according to Howe and Jackson.That balance will go in the red in 2013, just15 years from now; in 2031, the annualdeficit will be roughly $734 billion.

♦Free Trade Is a Right and a Blessing“People should have the right to exchangethe sweat of their brows, the products oftheir hand and their minds with whomeverthey wish” writes Washington Post columnistJames K. Glassman. In “The Blessings of FreeTrade (Trade Briefing Paper no. 1), Glassmanargues that free trade not only is our rightas human beings but also is good for oureconomy. We should not be afraid of a tradedeficit, Glassman argues, because it meansthat we are importing more wealth than weare exporting. Glassman concludes that “itwould be smart for the United States toabandon its current negotiating posture,which is that we will take down our tradebarriers if you will take down yours.” ■

STUDIES Continued from page 13

James A. Dorn, Cato’s vice president foracademic affairs and editor of the CatoJournal, has received the Regents’ FacultyAward for Excellence in Research/

Scholarship from the Board of Regents ofthe University System of Maryland. This isthe highest honor bestowed on facultymembers by the Board of Regents. Dorn,who joined Cato in 1982, is a professor ofeconomics at Towson University outsideBaltimore. The award notes that he is“nationally and internationally recognizedfor his contributions” to scholarship ineconomic development and monetary policyand for his efforts to encourage debate onsuch topics in the United States, China, and

the former Soviet Union. Dorn is editor ofthe new Cato book, China in the NewMillennium: Market Reforms and SocialDevelopment.

♦ Michael Tanner, director of Cato’s Projecton Social Security Privatization, has had abusy travel schedule lately, much of itdesigned by the White House. To increasepublic understanding of Social Security’sproblems and the benefits of privatization,Tanner has visited each of the cities wherePresident Clinton has held “national townmeetings” on Social Security reform. Beforethe first event, in Kansas City, Tanner visitedthe city and spoke to the editorial boards of

the local news-papers and to atown hall meetingsponsored by Sen.Sam Brownback(R-Kans.). JoséPiñera, co-chair-man of the proj-ect, also visitedKansas to addressa large group ofstate legislatorsand students at aKansas City college. Tanner went back toKansas City for the town meeting itself andappeared on a number of television shows.

Gov. Gary Johnson at Cato’sAlbuquerque seminar.

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Cato Books

So you want to stop a scientist fromexposing the truth, but you don’t knowhow. Well, all that is a thing of the past.In the new Cato book Silencing Science

by Steven J. Milloy and Michael Gough, youcan get instructions on how to keep anypesky scientist from doing, publishing, orspreading the results of valuable research.After all, facts aren’t important when a causeis at stake.

The book reads like a handbook for keep-ing scientists from plying their trade. Under-neath the tongue-in-cheek style is a causticlook at how government, special-interestgroups, and corporations have manipulatedscience for their own ends, chipped awayat its credibility, and created an atmospherein which science can be silenced at virtuallythe push of a button.

Gough says the book stemmed from aconversation with Milloy, who wrote the1995 book Science without Sense: The RiskyBusiness of Public Health Research. “It start-ed out with the silicone breast implant busi-ness. We started from there, but we thoughtit might be characteristic of how special inter-ests use science.” Historical incidents suchas the prosecutions of Galileo and John Scopesforeshadowed today’s subtler attempts tosilence and distort science.

Silencing Science opens by exploringbanned research. As a reaction to Scottishscientists’ cloning of Dolly the sheep in 1997,the Food and Drug Administration declaredthat human cloning research would require

FDA approval, and President Clinton askedCongress to pass a ban on human cloning,despite its possible benefits in treating can-cer, burn victims, reproductive disorders, andother conditions. As the authors point out,banning research “sounds draconian—butit’s also effective.”

But one of the best tools the governmenthas for stopping science is regulating it outof existence. The Environmental ProtectionAgency is crucial on that front. In a proposed1994 regulation, the EPA planned to ban“‘novel pesticidal substances introduced intoplants’ along with the ‘genetic materialnecessary to produce them.’” In other words,the regulation covered plants that had beencrossbred to enhance their natural pesticidesso they could withstand natural predatorsand diseases and thus produce high-yieldcrops effectively and cheaply. Congress hadgiven the EPA authority to regulate pesti-cides. It hadn’t given the agency authority toregulate genes or the manipulation of genes.The EPA, in its zealotry to regulate, classi-fied naturally occurring genes as sources ofpesticides, making plants analogous to pes-ticide factories.

Another trick for making science workfor you—and only you—is to edit it the rightway. The authors tell of a UN Intergovern-mental Panel on Climate Change report onglobal warming in which every reference touncertainty or doubt about the credibility ofdata linking human activity and global warm-ing was edited out of the executive summa-

ry after it had beenapproved.

Those are just afew of the morecrafty methods theauthors mention.Much more of thebook is devotedto traditionalways of stoppinginformation,such as harass-ment, intimi-dation, and lit-igation.

Gough says the problemsidentified in the book are ongoing. He saysthere are three major areas of contentionbetween special interests, including the gov-ernment, and science: “The first is cloningand human reproductive technology. Thesecond thing is, of course, the global warm-ing controversy. The third is the government’suse of science. The recent decision by a fed-eral judge to throw out the EPA’s assessmentof the health risks of second-hand smoke hasto be a slap in the face of the EPA, and itunderlines the importance of scientists andcitizens who value science and stand up forit. I think that’s going to force the EPA tostart doing science instead of implementingpolicy first and doing the science afterward.That’s all for the good.”

Silencing Science can be purchased for$8.00 by calling 1-800-767-1241. ■

He also went to Providence, Rhode Island,to talk with editorial boards before thesecond town meeting. Cato’s most elaborateeffort was in Albuquerque, where the townmeeting focused on private investment.Tanner visited the city two weeks before thepresident to talk to editorial boards andappear on several local broadcasts, then wentback a week later to anchor a Cato CitySeminar at which Cato president Ed Crane,former representative Tim Penny, and NewMexico governor Gary Johnson also spoke.The event drew over 100 participants andwidespread media coverage. With a large adin the Albuquerque newspapers, Cato madesure that New Mexicans were aware of thecase for full privatization before the president

and the national media arrived on July 27.

♦ Cato Sponsor John Gilmore, cofounder ofthe Electronic Frontier Foundation, led anEFF team that cracked the standard data-scrambling code in less than 3 days,shattering the previous record of 39 days.That success demonstrates that thegovernment’s preferred 56-bit key is notsufficient to protect encrypted data fromprying eyes. “EFF has proved what has beenargued by scientists for 20 years, that [DataEncryption Standard] can be cracked quicklyand inexpensively,” Gilmore said. The victorystrengthens the argument that thegovernment should not limit the developmentand use of stronger encryption.

♦ Development economist P. T. Bauer’s leadarticle in the new issue of the Cato Journal(vol. 18, no. 1) is a tribute to the late Indianeconomist B. R. Shenoy, whom Bauerdescribes as “a hero and a saint” for hispersistent critiques of comprehensive eco-nomic planning at a time when most econ-omists embraced such policies. Other articleson development issues include Pascal Wickand Jane Shaw on the World Bank’s failuresin Ivory Coast, Penelope Brook Cowen andTyler Cowen on privatizing water supplies,and Mwangi S. Kimenyi on ethnic problemsin Africa. William A. Niskanen examines theimpact of the Perot voters, and editor JamesA. Dorn contrasts market socialism with“market Taoism” in China. ■

From Galileo and Scopes to cloning and the EPA

You, Too, Can Silence Annoying Scientists

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CATO POLICY REPORT1000 Massachusetts Ave., N.W.Washington, D.C. 20001

ADDRESS CORRECTION REQUESTED

Nonprofit OrganizationU.S. Postage PaidWashington, D.C.Permit No. 3571

“To Be Governed...”

♦Sit down, shut up, get out of that car, giveus your money

Vice President Gore announcedyesterday that the federal government wasgoing to start using “plain language” in itscommunications with the American people.

—Washington Post, June 2, 1998

♦Laissez-nous faireGov. James S. Gilmore III appointed his

economic brain trust today, choosing . . . 155 business people, state officials andcommunity leaders to help him devise astrategy to maintain Virginia’s strongeconomy.


♦I came here to defend the status quoThe House voted 219 to 209 yesterday

to abolish the current tax code by Dec. 31,2002. . . .

“You just don’t play Russian roulettewith something like the tax code,” said Rep.Amo Houghton (N.Y.), a leading moderateRepublican who voted against the measure.“I didn’t come down here just to sort of goalong with the crowd.”


♦Let’s risk itCongress . . . might require the millions

of people who use [Women, Infants, andChildren program] grocery vouchers to buy only lower-priced, house-brandcereals. . . .

The National Association of WICDirectors . . . [is] concerned that peoplewill drop out of the program . . . if theydon’t think the food vouchers are meeting

their needs or tastes. . . .[Massachusetts WIC director Mary]

Kassler conducted a survey in 1995 andfound food choices were important toMassachusetts WIC participants. Theywanted name brands and probably wouldleave the program if the vouchers restrictedtheir shopping too much.

—Boston Globe, June 11, 1998

♦A good laugh at our expensePresident Clinton lauded Congress as

he signed the nation’s new $203 billionhighway bill. . . .

Clinton, who received a sermon-likeintroduction from Transportation SecretaryRodney Slater, joked to Senate MajorityLeader Trent Lott, R-Miss., and the othermembers of Congress in attendance that hethought the secretary was going to concludeby passing a collection plate.

“Then I realized that you had alreadygiven him all the money,” the president said,prompting an eruption of laughter.

—Associated Press, June 10, 1998

Just before traveling to Beijing on Feb.14, [UN ambassador Bill] Richardson paida call on his U.N. counterpart, Qin Huasun.A politician with a mischievous streak,Richardson put on a serious face and,according to one witness, told Qin: “I wantto come to China to focus on one subject.”He paused. “Human rights.”

As Qin stared back in disbelief,Richardson burst into a grin. The Chineseambassador threw back his head andlaughed.


♦Act like parents, vote like the ConstitutionProspects for passage of landmark anti-

tobacco legislation this year evaporatedWednesday. . . .

“If more members of the Senate wouldvote like parents rather than politicians, wecould solve this problem and go on to otherbusiness of the country,” a clench-jawed,flushed President Clinton said.

—USA Today, June 18, 1998

♦Socialism evolves“We can no longer speak in terms of

owning the means of production or of asocialist system that was opposed to thecapitalist system,” [French prime ministerLionel Jospin] told reporters . . . on his visitto Washington yesterday.

Socialism means “reconciling [free-market] efficiency and social justice in apolitical framework that is democratic,”Mr. Jospin said. “Liberty and equality mustgo together.”

—Washington Times, June 20, 1998

♦Famous last wordsIsn’t there a way to capture the stock

market’s higher yields without underminingthe existing program? . . . The governmentcould gradually invest a portion of the trustfund in passive stock funds. . . .

It would be easy to prohibitmanipulation of the market for politicalreasons. All you would have to do is assignresponsibility for the investments to a quasi-independent body, then carefully limit howit can make investment decisions.

—Jonathan Cohn in the New Republic, July 13, 1998

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