Revolution and political survival Jude Wanniski February 9, 2001

To: Students of Supply-Side University
From: Jude Wanniski
Re: Revolution and political survival

This week’s lesson is one I did not plan even a week ago, but with so much attention in recent days of Ronald Reagan’s 90th birthday and his legacy as President, I decided to discuss the difficulties of political revolution -- a topic I would normally take up near the end of the semester. The Reagan Revolution was at least the beginning of a “turning of the wheel” of political economy. As we learned last week in discussing the margin where all change takes place, a revolution to be successful must be able to start on the right foot and move in the right general direction, or the most important forces in society will stop it in its tracks. The forces of the status quo, the way things are at the moment. Of all the motivations of individuals or enterprises or nation states, the highest priority is always given to self preservation. If you do not survive, what else is there? In The Way the World Works, where I discussed the law of diminishing returns in relation to tax policy, I observed that in wartime, government can levy much higher taxes on the population than it can in peacetime, because of this basic principle of survival. The Red Army could hold off the Nazi Wehrmacht at Leningrad because the population was willing to be taxed at almost 100% of its output, for the alternative was worse.

The same principle applies to the other extreme, which brings to mind one of Reagan’s favorite stories, which he told on the campaign trail in 1980, but which would be so politically incorrect today that his advisors would tell him to clam up. The story told of how he happened to find himself in the federal offices in Washington of the Bureau of Indian Affairs. There he encountered a bureaucrat seated at his desk, his head down as he sobbed uncontrollably. Reagan gently asked him what was the matter and the bureaucrat looked up and said tearfully, “My Indian died.”

The point, of course, is that once government begins a “program,” as soon as it takes root, it may exist forever, even though its reason for existence has dwindled to the vanishing point. As long as the smallest, weakest “special interest” is dependent upon the program’s continuation, its “team” will spend all its waking hours trying to figure out how to survive. All it really needs is a private patron who either believes in its mission or is making enough money through ancillary support of the mission that he/she is willing and able to enlist the assistance of a congressperson. In the Reagan years, there was an actual attempt to scrub from the federal bureaucracy an agency founded so long ago that the Library of Congress had a hard time tracing its history. It was the “Tea Tasters Board,” which had several employees and an annual budget. As far as I know it is still in existence, because the Congress found it too difficult to close it down even with all the publicity it got. The forces working to preserve it included totally unrelated agencies and commissions which also were deserving of extinction and saw the utility of a tea-taster firewall.

If such an insignificant little commission could find a way to survive in a time of enormous budget deficits, with internal congressional pressures to somehow economize, imagine how difficult it is to deal with the institution President Eisenhower made famous in his farewell address, the Military-Industrial Complex. The intellectuals who are paid hard cash and given Think Tank sinecures to rationalize more defense spending in wartime do not disappear when war ends. It is because they develop expertise in defeating adversaries so their natural instinct is to look for adversaries in peacetime, in order to extend their careers. If they cannot find them, it is in their survival interest to stir up an adversary, to provoke a friendly neighbor into a fight, in order to persuade the taxpayers and the politicians that a military build-up is a matter of national survival. Eisenhower, a warrior as General, a peacemaker as President, was in a perfect position to see the need for a balancing weight to keep the warriors in check during peacetime. The opposite is also true, of course. In wartime, when the nation’s survival is at stake, there has to be a willingness to keep in check the eagerness of those forces willing to settle for peace at any price. The expression used by such peaceniks during the Cold War was “Better red than dead.”

One of the chief reasons the United States has become the most powerful nation in the history of the world lies in the beauty and balance of the constitutional democracy structured by the Founders. The process of policymaking actually appears messy on the surface compared to the policy mechanisms of other governments, but as Alexander Hamilton explained in Federalist #1, the structure forces compromise toward a golden mean. The outcome of the national elections last November has evenly divided the partisan powers of the government, with Republicans winning by the narrowest of margins in the executive and legislative branches. There are many important national security issues to be addressed by this government, the most important being the size and scope of a missile defense shield. If President Bush had won the presidency with a sizeable majority of the popular vote or a comfortable margin in the Electoral College, and if Congress were safely Republican, his fervent advocacy of an extensive land-based shield would translate into major appropriations for this program. The Republican Party, after all, is the “Daddy” party, and would like its defense industry to thrive even in peacetime, even at the expense of tax cuts, spending on social programs, or reduction of the national debt.

This morning’s Wall Street Journal has a front-page story about the missile shield that should be read in this light: “Among the Unknowns About Missile Defense Is Who the Enemy Is,” an excellent account by Carla Anne Robbins. If the nation is going to spend $60 billion as a minimum on the kind of shield President Bush has been talking about, what is that amount of money going to buy for the nation? Who will it defend against? There is no obvious and immediate threat, so the advocates must devise ways to persuade us that there will be a future threat and unless we act now we will not be able to meet it. The issue is one we will not get into here -- as we only are dealing with the question of revolution and survival. When you go from wartime to peacetime, the turn of the wheel is favorable to those who favor diplomacy over force, such as our Secretary of State, Colin Powell, and less favorable to those who are responsible for maintaining the armed forces, such as our Secretary of Defense, Donald Rumsfeld. The press corps of course has warmed to this contest and will watch for every little sign that one side or the other is gaining or losing in this struggle over policy. At stake is not only money, but also the U.S. relationship with the rest of the world. The warriors in the Rumsfeld Pentagon and their friends in the press corps will work to maximize the public’s concerns about the threat of nuclear missiles coming from potential adversaries abroad. The diplomats in the Powell State Department will argue against antagonizing peacetime friends, such as China and Russia, and thus making of them adversaries who will be forced into an arms race.

During the campaign last year, I had noted that the “Mommy” party’s candidate, Vice President Al Gore, had his equivalent of a “missile-defense shield” on the opposite side of the spectrum: Global warming. The idea that we must protect Mother Nature against man-made despoliations is one that nobody contests. The policy questions are answered easily when the pollution is obvious and the solutions are easy and affordable. We must be able to breathe clean air and drink potable water. It is when the pollution is not so obvious and the solutions to the not-so-obvious pollution are difficult and expensive that the debate becomes intense. I saw it first as an editorial writer for The Wall Street Journal in the early 1970s when Congress debated the issue of automobile pollution in the cities and how to deal with it. Chrysler Corp. argued for its “lean-burn engine,” which would meet the goals as set in parts per million of pollutants. General Motors had placed its bet on catalytic converters. The government came down in favor of GM, at least in part because it had more political clout, but the point was that nobody really knew which was better when scientists were arguing about a few parts per million in the air.

The issue becomes even more difficult when we get to Global Warming, where the threat is not only impossible to see, but where all the evidence collected since the topic was raised has gone in the opposite direction. The environmentalists who have staked their careers on dealing with this threat are in the same boat as the national security intellectuals and munitions makers who have devoted their lives to missile-defense shields. No matter that the case they have been making has been disappearing from under them as satellites confirm there has been no sign of manmade warming over the last 20 years. As Ronald Reagan noted, they cannot face the fact that their Indian has died and there is no need for them. The scientist who first raised the red flag about the “greenhouse effect” of man-made carbon dioxide a generation ago, James Hansen, last summer publicly acknowledged the evidence no longer supported his hypothesis. The New York Times, which had invested thousands of tons of newsprint and untold gallons of ink on the global warming threat, played the Hansen story not on the front page, but deep inside the paper where it seemed inconsequential. It simply is not possible for armies of men and women and the institutions which support them to suddenly halt and disband because of facts.

This is no selective criticism of the NYTimes. The Wall Street Journal earlier this week ran a lead editorial in support of a national missile-defense shield that has as flimsy a foundation today as global warming. The editors are part of a team of pessimists on national security that will not admit their Indian has died. There still is plenty of room to argue for a missile shield to protect our fleets at sea. The political debate likely will have that outcome. And there still seems to be room for the climatologists to insist mankind is causing global warming problems with man-made chemicals. This is the tack Dr. Hansen has taken. The political process will shake things out, with fewer mistakes than if we did not have our system of government.

Supply-side economics has been another aspect of the Reagan Revolution, which confronted a status quo in the late 1970s that was observing a meltdown of world economy in general and domestic living standards in particular. The demand-side schools of economic thought that had managed the world into that mess had formed around the Keynesian fiscal ideas of John Maynard Keynes and his followers as well as the Monetarist ideas of Milton Friedman and his students. These intellectual paradigms could not on their own admit they had any part in the despoliation of the world’s economies. Once an intellectual becomes hard-wired into a belief system, it becomes nearly impossible to break out of it, especially if you have a large cadre of followers who might bolt if you told them you were wrong to begin with. There is today almost no “market” for Ph.D. economists who are monetarists or Keynesians, because their belief systems have been thoroughly discredited in the private economy. They continue to occupy the most important positions in government, though, because their views serve the interests of those in the electorate who depend upon a government that redistributes wealth from those who produce it to those who are in a position to effectively demand it. There is nothing surprising about this. It is the nature of political economics that old ideas die hard and revolutions in a constitutional democracy take long periods of time to work out the transitions. The American Revolution took place at the same time in human history as the French Revolution, which employed the guillotine to speed things up. The American Revolution, on the other hand, could only get underway by putting the slavery issue on the back burner, where it simmered until the Civil War brought a bloody and incomplete resolution -- the outcome of which we continue to discuss and debate.

We’ll return to these themes later in the semester and try to relate the principles discussed here to the domestic and foreign policy problems which are on the front burners these days. Please direct questions on today’s lecture to the Talk Shop, where the other SSU students can engage them. Or place them directly to: phocking@polyconomics.comn.