And Too Late To Correct Them?

9 February 2004

The Seven Policy Blunders That Changed the National Character
by Craig J. Cantoni

As global competition has shown, other nations can compete in natural resources, capital, technology and education. They can even replicate our form of government and economic system, as seen in the fact that the United States ranks only tenth on the Index of Economic Freedom, which is published by the Heritage Foundation and the Wall Street Journal.

That leaves one true national competitive advantage that is very difficult to replicate and that, once lost, is virtually impossible to regain. It is our heritage of self-reliance, individualism, thriftiness, meritocracy and entrepreneurialism.

It is my contention that due to seven policy blunders, our national character has been transformed to dependency, collectivism, profligate spending, entitlement and bureaucracy. As a result, we have become risk averse and now prefer stability over change, government-reliance over self-reliance, wealth redistribution over wealth creation, the regulatory state over free markets, and bureaucrats over entrepreneurs. In other words, we have become the opposite of what we were a century ago, when we achieved the greatest advancement in standard of living that the world had ever seen.

There are hundreds of examples of the transformation, but in the interest of brevity I’ll give just two…

The first can be seen in the rhetoric of presidential candidates, including President Bush. Their theme is not what we should do for ourselves but what the government should do for us. It is a message of entitlement and dependency, a message that both parties now embrace.

Another example is the growth of jobs and professions that consume wealth instead of creating it. Government employment at the federal, state and local levels now stands at a record 21 million workers, or nine million more than in manufacturing. And millions of highly paid, high-growth jobs in the private sector are those that interpret and administer government regulations, such as tax accountants and lawyers.

Let’s turn now to the seven policy blunders, which are listed below in reverse order, with the biggest blunder listed last.

No. 7: Wage and Price Controls During World War II

This will require more explanation than the other blunders.

During World War II in 1942, the government instituted wage and price controls. To get around the controls, employers began offering medical insurance as an employee benefit. The government then institutionalized the benefit by allowing employees to receive medical insurance in lieu of pay on a tax-free bases. Later, the National Labor Relations Board institutionalized it further by ruling that medical insurance would be treated the same as pay for collective bargaining purposes.

This was a policy blunder because it mortally wounded a consumer market in medical insurance, made employees dependent on their jobs for the insurance, reduced the amount of pay that employees would have otherwise received, and eliminated the incentive of patients to control their health care spending. But worst of all, the blunder created a mindset in the American public that health care should be provided by a third party, unlike such other necessities of life as food, shelter, clothing and transportation. It opened the door for the government to be the third party.

As medical insurance and health care costs have skyrocketed in the absence of a consumer market, growing numbers of the public and the press have come to the wrong conclusion—that the problems with medical insurance and health care are due to the free market, when in actuality, the problems are due to the absence of a consumer market. As a result, they believe that the ultimate third party, the government, should control one-seventh of the nation’s economy through nationalized health care, not realizing that it was a government blunder 60 years ago that helped to create today’s problems.

Blunder No. 6: Medicare

The coupe de grace was dealt to a consumer market in health care by the passage of Medicare in 1965. About 90 percent of Americans who have medical insurance now get their insurance from a third party, either from an employer or the government. This is the reverse of the situation with other necessities of life, which are purchased directly by 90 percent of people with their own money.

Instead of focusing on the relatively small percentage of the elderly who are too poor to purchase their own health insurance, Medicare, like its sibling Social Security, gave an entitlement to all retirees, thus putting all retirees on the government plantation and creating a mindset among non-retirees that they do not have to save for old age.

Medicare proves that the public good is not served when a government benefit is given to people who don’t need it. Medicare has resulted in public immorality, not public good. The growing deficit between current Medicare revenue and current Medicare expenditures will have to be covered by future generations. That is a fancy way of saying that the wealthiest group of Americans, seniors, are robbing the cradle by sending their health care bills to children. Shame on us.

Blunder No. 5: Social Security

The linchpin of the New Deal, Social Security has the same problems as Medicare. It proves the axiom that an entitlement, once started, will expand far beyond its original purpose and will be politically impossible to roll back. It also shows how the national mindset has changed about government and business. For example, there was national outrage over the fraud at Enron, but there is not national outrage over the fraud of Social Security, which is exponentially greater than the Enron fraud. Enron executives will get what they deserve: jail. But no one will go to jail over the Ponzi scheme of Social Security.

Blunder No. 4: The Great Society

There are those who believe that Lyndon Johnson’s Great Society program reduced poverty. There are others who believe that poverty would have been reduced quicker if the program had not stunted positive socioeconomic trends. But it is irrelevant who is right.

What is relevant is that the Great Society did not ask for anything in return for government handouts. It neither asked for work nor changes in behavior. Thus, it resulted in not only skyrocketing out-of-wedlock births and the atomization of two-parent families, but also, more importantly, a change in the character of a large segment of the American population.

Blunder No. 3: The Sixteenth Amendment

The passage of the Sixteenth Amendment to the U.S. Constitution in 1913 authorized the income tax, thus setting the stage for profligate government spending, class warfare and government plunder.

Primarily because of the progressivity of the income tax, the majority of Americans now get more back in entitlements and government services than they pay in taxes. We have passed the tax tipping point, which is the point at which the majority of Americans can rob the minority and delude themselves into thinking that is fair and just to take other people’s money.

Such theft has become so accepted that there is no longer a moral debate about the income tax. The tax is a given. It is such a given that the public and the press do not question the efficacy and morality of the government taxing income once when it is earned and then again when it is saved for retirment and earns investment income. Our national thinking has been so warped by the Sixteenth Amendment that the public and the press speak in glowing terms about 401(k) plans and other provisions of the income tax code that allow Americans to save a portion of their income on a tax-deferred basis. Even the conservative business press does not question why the government has the right to tax our savings at all.

Our thinking has been turned on its head. Thanks to the Sixteenth Amendment, Americans have been led to believe that their money belongs to the collective to be redistributed as the majority sees fit. Income tax cuts are seen as taking something that belongs to the government instead of returning something that belongs to individuals.

Americans do not realize that although they have a Bill of Rights, they do not have a constitutional right to keep their money. There is nothing in the Constitution that prohibits the government from taking all of their money.

Blunder No. 2: Eroding the Constitution

Many Americans believe that the nation is a majority-rule democracy and not a constitutional republic. It is not their fault that they believe this. It is the fault of politicians who have ignored the original meaning of the enumerated powers and the General Welfare and Commerce clauses of the Constitution. They have subverted the Supreme Law of the Land and have broken their oath to uphold the Constitution. They have done so because the press and the judiciary have been willing accomplices.

For example, there is no constitutional authority for the federalization of education, but there was not a peep of protest from the establishment press or the judiciary about the unconstitutionality of President Bush’s No Child Left Behind program. Similarly, there is not a peep of protest when the federal government funds intrastate light-rail systems that have absolutely nothing to do with interstate commerce.

Let’s turn to the biggest blunder and see why there is not a peep of protest.

Blunder No. 1: The Centralization of Public Education

Much of the impetus for pubic education in the mid-nineteenth century was to stop the growh of Catholic schools and to indoctrinate Catholics in the St. James Bible. But after that initial period of tyranny, public schools got out of the religious indoctrination business and focused on the three R’s. And because pubic education was decentralized for its first 100 years, public schools reflected the mores of the local community and were under the community’s control.

Today, public schools are back in the indoctrination business. They are increasingly under the control of the federal and state government, as well as under the influence of teacher unions and other special interests. Public schools also are the purchasers of textbooks from a few national textbook publishers that publish the same politically correct, sanitized, government-approved gruel. The result is a government monopoly on K-12 classroom thought, which is delivered in the classroom by unionized, government teachers.

Because of the public education monolith, the vast majority of Americans believe that the seven policy blunders are not blunders at all. They believe the opposite: that the blunders are what made this nation great.

And that, my friends, is why the nation will not remain great.

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Mr. Cantoni is an author, columnist and founder of Honest Americans Against Legal Theft (HAALT). He can be reached at

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