The Metrics Don't Lie

3 June 2004

Are Republicans In Denial
or
Simply Power-hungry Liars?
by Craig J. Cantoni
June 3, 2004

Republicans continue to say that they are the party of limited government and that voting for them will reduce the size and reach of government. At the same time they claim to be winning against the Democrats and the Left.

Republican leaders who say that the Republican Party is winning and is the party of limited government are either in denial about the growth of govenment or are power-hungry liars.

Let’s start by looking at the growth of Leviathan over the last century and then follow with a look at more recent growth.

According to the Heartland Institute and verified by my own research, total government expenditures were 8.2 percent of Gross Domestic Product in 1900. Today, they hover around 30 percent.

Memo to Republicans: When the score is 30 to 8.2 in your opponent’s favor, you’re not winning.

Republicans say they have won if they succeed in reducing government expenditures by a percentage point or two. But even a reduction to 28 percent of GDP would mean that government expenditures would be 3.4 times higher than 100 years ago.

Memo to Republicans: Unless it’s a game of golf, if your opponent’s score is 3.4 times higher than your score, you are not winning.

More important, like a cancer, the nature of the expenditures has metastasized into something that is insidious and pernicious.

In 1900, almost all government expenditures were for the common good—for those government services like national defense and public infrastructure that benefited all people equally or as equally as practical. Back then, transfer payments were only 2 percent of government spending. Today, they are over 40 percent. Stated differently, there has been a 20-fold increase in transfer payments in 100 years.

Memo to Republicans: When the score is 20 to zero in your opponent’s favor, you’re not winning.

Of course, the words ”transfer payments” are a government and media euphemism for ”theft.” We can have endless debates about the merits of programs like Social Security, Medicare, Medicaid, KidsCare, AFDC, school lunches, school loans, farm subsidies, mass transit subsidies, subsidies for professional sports teams (e.g., Bush’s Texas Rangers), and thousands of other thefts, er, income transfers. But make no mistake about it, such programs benefit the recipients of the money much more than society at large and certainly more than non-recipients. For example, there is no doubt that a Medicare enrollee will get a direct, tangible benefit from the Republican prescription drug benefit. However, few if any benefits will accrue to future generations that have to pick up the $7 trillion tab for the Medicare deficit.

It is axiomatic that people on the receiving end of transfer payments tout the general welfare more than those on the paying end. Similarly, politicians who gain political power by redistributing money tout the general welfare more than politicians who don’t gain from redistribution. Some will even go as far as to call themselves ”compassionate conservatives” to win votes with other people’s money.

Compassionate conservatism is expensive. Discretionary non-defense spending has increased under President Bush more than under any president since Lyndon Johnson.

Unfortunately, he has been aided and abetted by the mainstream media, Hollywood and other shapers of the popular culture—all of whom favor the takers of other people’s money over the rightful owners of the money. And, naturally, government schools, which have a state monopoly on K-12 classroom thought, do not teach that transfer payments are synonymous with theft. To the contrary, the schools are used by the government to recruit parents to sign up for transfer payments. Maybe that is what President Bush means by his ”Leave No Child Behind” program. If there were truth in government labeling, the name of the program would be ”Put All Children on the Government Plantation.”

When my grandparents walked off the boat and onto Ellis Island at the beginning of the 20th century, about 60 percent of government spending was at the state and local levels. A century later, federal spending is twice as much as state and local spending combined, costing each household a whopping $20,000 per year. The Founders’ idea of a limited national government has been turned on its head, and with it, the belief of citizens that they can influence the government.

As anyone who has ever worked in a large corporation knows, the more centralized and bureaucratic an organization becomes, the less influence those at the bottom of the organization have and the more out of touch those at the top become. The same holds true for nations.

The other thing that happens is that power shifts to bureaucrats. Low-performing corporations are almost always centralized, hierarchal organizations in which accounting, human resources, legal, government affairs and other administrative departments have more power than sales, engineering and manufacturing. Over time, the culture changes from risk taking to risk aversion and from dynamism to bureaucracy. The same holds true for nations.

There are now almost twice as many public-sector employees at all levels of government as manufacturing employees. Tellingly, the mainstream media engages in hyperbole about 100,000 call center jobs being outsourced to India but is silent about the ”outsourcing” of millions of jobs from the wealth-producing private sector to the wealth-consuming public sector.

Before the income tax was authorized in 1913 with the ratification of the Sixteenth Amendment, Americans, including my grandparents, could save for retirement and not pay any taxes on the earnings on their savings. None. Zero. Today, it is very difficult to earn enough on one’s retirement savings to beat inflation and taxes.

Both Democrats and Republicans pretend to be munificent by letting taxpayers defer a small portion of their income taxes through such tax code provisions as 401(k) plans. And the government’s bed mate, the mainstream media, including the business press, joins in the pretense. In reality, such provisions are a bonanza to government bureaucrats and hundreds of thousands of tax accountants, tax lawyers, investment advisors, corporate benefits administrators, sellers of record-keeping software, and other professions that feed off the body politic, including trial lawyers who sue employers when they inadvertently violate some arcane regulation of the Employee Retirement Income Security Act.

In 1914, the year after the ratification of the Sixteenth Amendment, the income tax per capita was $69 in inflation-adjusted dollars, versus over $2,500 today. In 1914, less than one percent of the population had to file a tax return. Today, 45 percent of the population has to file. The number of IRS employees was 4,000 in 1914, versus 110,000 today. In 1914, there were four pages of IRS forms. Today, there are over 4,000 pages. The tax rate on a median family was zero in 1914. Today, it is over 25 percent. (Source: Cato Institute)

Memo to Republicans: When the score is 25 to zero in your opponent’s favor, you’re not winning.

And then there are all of the hidden costs of regulations. To take just one example out of thousands of examples, a little-known federal agency is harassing—yes, harassing—the Swift Transportation Company of Phoenix for being successful. A $2.4 billion company with 16,500 trucks, Swift is the largest long-haul trucking company in the nation.

The harasser is the Federal Motor Carrier Safety Administration, which was a Frankenstein monster created in 1999 by the creator of Frankenstein monsters, Congress, ostensibly to make roads safer. Which party controlled Congress in 1999? Hint: It wasn’t the Democrats.

It just so happens that large-truck accident rates have declined by more than half over the past three decades, and companies like Swift already had incentives to reduce accidents, including the prospect of fewer lawsuits and lower premiums for liability, medical and workers’ compensation insurance. Because of the incentives, Swift had only 1.6 fatalities per 100 million miles driven in 2002, but that didn’t stop the FMCSA from harassing the company.

What was Swift’s offense? It didn’t complete the required paperwork to the satisfaction of the bureaucrats at FMCSA.

All bureaucracies grow larger, and FMCSA is no exception. Two years ago its budget was $361 million. This year it requested a 24 percent increase to $447 million, which is equivalent to the annual income of approximately 11,000 families.

Memo to Republicans: Creating new monsters is not a way to achieve limited government and grow the economy.

At its current growth rate, FMCSA may eventually issue enough regulations to rival the current 100,000 pages of Medicare regulations, including the hundreds of pages for the new Republican prescription benefit that will grow to thousands of pages. Medicare regulations have little to do with patient care, just as FMCSA regulations have little to do with highway safety. But the regulations have turned doctor offices into paper factories and a source of income to consultants who help them stay out of trouble and to trial lawyers who want them to get into trouble.

The regulations also increase campaign donations (really protection money) to politicians. And then do-gooders, who can’t connect the dot of the growth of Leviathan with the dot of the growth of campaign contributions, want to solve the problem of money in politics by restricting free speech instead of reducing the size of the regulatory state.

Multiply the dead weight of the FMCSA by a thousand, and you’ll get an idea of how much of the nation’s resources are disappearing into a bureaucratic black hole instead of being invested in productivity improvements and new businesses. Some estimates put the annual cost of regulations at $7,000 per household

Just as sobering is the fact that many of the nation’s best and brightest people, including Republicans, make six-figure incomes from feeding off the regulatory state by being Gucci-clad regulatory experts, consultants and lobbyists. They will not let their regulatory rice bowl be taken without a fight.

So how can Leviathan be stopped? Since all political change begins with a change in mindsets, it can’t be stopped unless there is a change in the public’s mindset about transfer payments. As long as most Americans do not realize it is wrong to feed off of the regulatory state and to take their neighbor’s money for themselves under the guise of the common good, Leviathan will continue growing and politicians will continue finding creative ways of redistributing money, regardless of what the U.S. Constitution says about enumerated powers.

But Republicans can’t change mindsets as long as they tiptoe around this issue for fear of alienating voters, for fear of being called mean-spirited and for fear of becoming a minority party once again. If they are really for limited government and really care for this nation, they have to say over and over again, without equivocation, that transfer payments are a form of stealing and that stealing is not only wrong but will lead to our demise. Calling transfer payments ”compassionate conservatism” plays into the hands of liberals and leftists, who have their own euphemisms, such as ”social justice” and ”fairness.”

A party that speaks in euphemisms can’t be trusted. A party that wins elections but loses the war against Leviathan is a loser. A party that is the lesser of two evils is still evil. And a party that grows Leviathan while preaching limited government is either a liar, in denial or power hungry.

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Mr. Cantoni is an author of a book on bureaucracy, a columnist and the founder of Honest Americans Against Legal Theft (HAALT). He can be reached at ccan2@aol.com

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