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A Shot Of Growth In The Arm Of The Body Politic: An Interview With The Club For Growth's Steve Moore

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A Shot Of Growth In The Arm Of The Body Politic: An Interview With The Club For Growth's Steve Moore

A SHOT OF GROWTH IN THE ARM OF THE BODY POLITIC

From the August 2001 Edition of CEI Update

 

CEI: With the late Julian Simon you wrote It’s Getting Better All the Time. Is it really?  Why?  And what do you mean by that?

 

Steve Moore: The premise of our book is that Americans never had it as good as they do today, at least not materially. Most Americans have a notion that things used to be better in past eras than they are today, and we provide some fairly persuasive evidence that there has been more human progress in the last 50 or 60 years than in all of the previous centuries that man has lived on this earth. One thing that most surprises people about our findings is that some of the areas people are most convinced things are getting worse in are the very areas where things are getting better. One example is the environment; the amount of pollution in the water and air is declining, not increasing.  And it’s been declining for at least 30-40 years. It’s also true that people are concerned about overpopulation when, if anything, most industrialized countries are going to face a problem of a population implosion, not a population explosion, because of lower birthrates. In wealthier societies, birthrates come down.

 

Most Americans even think that on cultural issues things are getting worse:  things like crime rates and infant mortality rates and the number of illegitimate births and so on. And we find in the last 15 or 20 years that even these trends show improvement. The crime rate is down, the abortion rate is down, the rate of drug use has declined from its peak in the 1970s. These are good times, and Americans and people around the world tend to resist that message. But we think that the book provides a very powerful refutation of the idea that things are getting worse, not better.

 

CEI: We live in the most prosperous country in the most prosperous time in the history of the world. Is being able to worry one of the luxuries we enjoy as a result?

 

SM: That’s a good question. We ask the question throughout the book that despite the irrefutable evidence that things are getting better, why do people think things are getting worse? I think one reason is the media. The media inundates us with bad news. We say in the book that good news to the media is a contradiction in terms. If it’s good, it’s not news. So, when you are just being bombarded with stories of someone being murdered, or a plane crash, or a war, or child abuse, you think this is happening all over, and we are at the saturation point in these things. Part of the explanation when Americans think things used to be better is that we all used to be younger, and when we were younger, when we were kids, it never seemed to rain. I think it’s a kind of false nostalgia.

 

I think government has a lot to do with falsely scaring people. And that would make sense. The government is basically in business to solve crises. And if there weren’t crises, there wouldn’t be any reason for all these wonderful government programs that we have. The government has a vested interest in making us think that global warming is a crisis, or there’s an energy crisis, or a drug crisis, and I think that affects our attitude about these too. And not only that, but another thing my good friend Fred Smith and I have discussed and are in agreement on is that one of the real dangers here is that, because of the self interest of the people in government and academia to create these false crises, science has become quite perverted.  And this is dangerous:  that we are not using good science. A good example of this is in the global warming area, where 80-90 percent of climatologists agree there’s global warming. Well, 80-90 percent of these people are the people who would get funding if global warming research had a big increase in its budget. That’s a big problem and we as free market people have to find a way to combat it.

 

CEI: The Bush tax cut was signed recently to much fanfare. How do you compare the Bush tax cut to the Reagan tax cut?

 

SM: The Bush tax cut was an enormous political win for George W. Bush. He had to win and he did. This is the third largest tax cut since World War II. That’s nothing to sneeze at. That’s the good news. The bad news is that, as most of your readers know, this is a very delayed tax cut. It’s about half as large as we probably should have. The federal tax burden just in the last six or seven years has gone up from about 18 to 21 percent of GDP. This tax cut would only bring us about halfway back to where we’ve been historically. What I would argue is that what we need now is another big tax cut, and we need things that will immediately stimulate growth, because this tax bill will not immediately stimulate growth. We need a capital gains tax cut. We need the immediate repeal of the death tax, not a ten year phase out and then to have it phased back in in the 11th year. We need to see rates come down, and ultimately we have to scrap the income tax system completely and start over and replace it with either a sales tax or a flat tax.

 

CEI: Do you have a preference?

 

SM:  I’d like to see the United States abolish the income tax system entirely and go toward a consumption-oriented tax that would be paid at the cash register when you buy things, not by having the government compelling you to fill out 1040 forms and all sorts of other invasive types of information. So I’d like to see a national sales tax replace the income tax. I worry a little bit that Republicans could face some tough elections in the next couple years if the economy doesn’t turn around. And there’s no reason  to think that the economy’s going to because of this tax cut.  Most of the tax cut doesn’t even happen until 2005, 2006. My colleague David Keating likes to say that this would be a great tax cut … if we were living in 2008.

 

CEI: What’s the idea behind the Club for Growth?

 

SM: The objective is to try to elect more free-market tax-cutting candidates to congress. We believe that thanks to groups like the Cato Institute, CEI, and the Heritage Foundation, the intellectual war is largely being won by our side. We have all the strong intellectual arguments on our side. The question is, and I think Fred Smith is the one who is famous for saying it, if we’re so smart, why aren’t we winning? The answer is because the left plays the game of politics a lot better than we do. We’re trying to use some of the very tactics the left has used very effectively to elect people like Hillary Clinton and Barbara Boxer to Congress, but to use those tactics and fundraising mechanisms to elect good free-market people like Phil Gramm and Ron Paul. So, what we do is make recommendations on outstanding candidates to our members, and they decide if they wish to support them. And if they do, they send those checks to us. We use what is called the Emily’s List model of bundling contributions for candidates who want to cut taxes and slash government.

 

CEI: How did it fare in the last election?

 

SM: We were very pleased. The last election was the first we were engaged in. We were involved in 16 congressional races and we won 10. So, we felt good about that-- especially because, with the exception of one or two of them, all the rest were highly competitive, very close races, where we really feel that the money that our members raised for these candidates had a decisive influence. We took on some incumbent Republicans and Democrats, and by doing so I think we really put the fear of God in some of these people, and hopefully changed their voting in Congress.

 

CEI: Now that you’re in the business of electoral politics, what do you make of John McCain’s vote against the tax cut?

 

SM: John McCain’s policies have become schizophrenic.  Six years ago, McCain was a solid, fiscal conservative. But he really has changed. It’s been a complete metamorphosis, and it’s been extremely discouraging. John McCain is viewed by many as a great American hero. He had a strong following behind him. But, his recent voting behavior is bizarre, to say the least. I can’t explain his motivations, for why he was only one of two Republicans in the entire Congress to vote against the tax cut. Part of it might be because he has such a hatred of George W. Bush. Part of it may be that he sees this as the kind of way of setting up a center path to the White House if he wants to run as an independent in 2004. So, I think his motivations were mostly personal. Hopefully he doesn’t believe the types of things he was saying, like this would only help rich people. You could transplant Tom Daschle’s name on his speech. The two of them were saying exactly the same thing.

 

CEI: Is the aim of the Club to elect pro-growth candidates or to push the Republican Party in a more growth-oriented direction?

 

SM: Both. We see those two things as mutually reinforcing. So we try to help elect more pro-growth Republicans. Let me just restate that: We’re interested not just in helping elect more pro-growth Republicans but also helping de-elect some of the anti-growth Republicans. As the people at CEI know, just because someone has an “R” next to their name doesn’t mean that they are pro-growth. And so we think that by doing both of those things we can help improve the gene pool in Congress and also change the political calculus some of these members make when they stand up and vote on tough issues.

 

CEI: Would the Club fund a pro-growth Democrat against an anti-growth Republican.

 

SM: If we could find one (smiling).

 

CEI: Most Americans are going to be receiving tax rebate checks from the federal government in the next few months, partly to refund too much money that was taken in taxes and also partly to spur consumer spending this summer. What are your thoughts on this move?

 

SM: I think these rebate checks are going to be extremely popular with people. A lot of the press has been dismissing this as, oh, it’s only $300, and people just don’t care. People will care, and they will be very pleased when they get these checks. This will be a big political winner for Bush.  Economically, it will have very little effect. The problem in our economy today is not too little consumption, but too little investment and savings. The cost of capital is too high. The tax rebate does nothing to reduce the cost of capital. If you really want a stimulus for the economy, you’d get much more bang for your buck by cutting the capital gains tax. That would have a much more dramatic impact on investment and the capital costs than a rebate.

 

CEI: Jim Glassman has talked about the new investor class--so many more people own securities in some form now than even 20 years ago--saying it will transform electoral politics in the coming decades. Do you see that happening?

 

SM: I’ve been saying that as well. Larry Kudlow has been saying that. There’s no question that when people become investors their whole attitude about politics changes in a more free-market direction.   The person who owns stock is much more likely to favor tax reduction, free trade, Social Security privatization, and so on. I think this is something that could dramatically affect people’s future voting behavior. If you think about it, the whole idea of Marxism is that there would be this fundamental conflict between the owners of capital and labor. What’s exciting about the emergence of this new investor class is that the laborers are the owners of capital. As they become investors, the conflict dissolves. People are not going to want to bring to their knees the very industries they own. This is one of the reasons the Democrats and the leftists in Washington are so opposed to any kind of move toward Social Security privatization, because they know that their broader agenda of socializing the American economy will be very much hindered if you have an 80-90 percent investor class.

 

CEI: What do you think of the president’s economic advisers, namely Larry Lindsey and Paul O’Neill?

 

SM: (laughs) No comment. I think I’ll skip that one.

 

CEI: The recent tax bill contains an odd treatment of the death tax:  phasing it out for one year a decade down the road. Why has eliminating (or even modifying) the estate tax been so difficult, and what are the prospects for speeding up its elimination?

 

SM: I actually think it’s kind of a miracle that we, as a movement, have done as well on this issue as we have. It’s astounding that we have 60-70 percent support for getting rid of this tax, considering the fact that only the top two or three percent of Americans pay it. But Americans have a fundamental understanding that this tax is unfair and un-American.

 

CEI: Like 90 percent marginal rates?

 

SM: Exactly. This is something that I’m feeling very good about. One of the most interesting parts about the debate on the president’s tax plan is that the left’s main line of attack was class warfare.  And I think that was a strategic mistake by the left. It really fell flat on its face. Folks didn’t, for the most part, buy into the class warfare. The truth is that most Americans don’t hate rich people like Bill Gates and Michael Dell as much as Tom Daschle does.

 

CEI: Is the Club for Growth taking into account government regulations, which seem to us to be taxes on people’s behavior, if not their wallets?

 

SM: Our A-Number-One issue is taxes. But we also stand for smaller government, and reducing regulation is certainly part of smaller government. I’ll give you just one example of an issue that we’re very interested in getting involved in, and that’s this really insidious movement in Washington and California to regulate the prices of electricity and energy. This is a fundamental assault on capitalism. If you think about it, the price system is sacred. It’s what makes the capitalist system work. It’s extremely important that as a movement, we do everything to make the strongest possible case that price control is going to be a very destructive policy if it’s allowed to stand.

 

CEI: George Gilder, one of the Club’s advisors, recently stated that he thinks it’s politically pointless to focus on cutting government--beneficiaries of government largesse are too passionate and will fight to the death to preserve their subsidies. It’s basically not worth the effort, as long as you don’t grow government additionally. What do you make of Gilder’s comments?

 

SM: I think there’s part truth and part untruth to what George Gilder says. He, like me, is mostly interested in growing the economy. I think his point is that the burden of government is really the total government divided by total private sector economy. If you want to lower that burden, you can do one of two things--either shrink government or grow the private economy. George Gilder’s preference is to grow the economy. I describe that as growing the denominator. In fact, in the last six or seven years the size of the federal enterprise as a share of the economy has actually shrunk, and the reason it’s shrunk is because the economy has done so well, and government hasn’t kept up with it.

 

Where he’s wrong is that we can never give up the fight, the intellectual and moral case against big government, partly because if groups like CEI and Cato and the Club for Growth weren’t making the case for smaller government, it would be even bigger than it is. It would grow even faster. If we were to walk away from that fight, we’d see, not six or seven percent growth in spending, but nine or ten percent growth in spending. But I agree, it’s discouraging to see what’s happening. I mean, we’ve had a Republican President and practically an entire Republican Congress for the first time in a long time, and the government is going to grow by 7 or 8 percent this year. This is awful, it’s a bigger growth in spending than when the Democrats controlled things.

 

CEI: In the mid-1990’s, a nativist, anti-immigrant strain in the Republican Party, led by Pete Wilson and Pat Buchanan and Lamar Smith and Alan Simpson, garnered a lot of attention. What has happened to the issue?

 

SM: The restrictionists, from the Peter Brimelows to the George Borjas’s to the Federation for American Immigration Reform, have all been proven spectacularly wrong over the past 20 years. These were people who predicted that if we continued to let immigrants in at the pace that we have, we would see mass unemployment and mass poverty and American competitiveness declining. Guess what? We’ve had just the opposite. We’ve had the greatest period of growth in the history of western civilization, even as we’ve been letting in record numbers of immigrants. This has been very inconvenient to people like Borjas and Brimelow and my friends at National Review who keep saying that immigrants are bad for the economy. Where’s the evidence of that?

 

Now, I’m not saying that immigrants necessarily caused the expansion, but it shows that we can have a prosperous economy and high levels of immigration at the same time. They can coexist. I do believe that  immigrants, for the most, part are a fairly big benefit to the American economy. They are the grease that makes this capitalist system work so well here. Compare the U.S. to Europe and Japan today, and one of the big differences is that when it comes to labor rules, though we’re overly regulated, we’re not nearly as regulated as Europe and Japan are. And the other advantage we have is that our industry has ready access to these immigrants who come in and fill these vital niches in various occupations, whether you’re talking about the people who pick fruits and vegetables and put food on our table or the people who are creating the new technology coming out of Silicon Valley, and all the range in between is being done with this wonderful combination of Yankee ingenuity and some of the best and brightest and the strongest minds from the rest of the world. It’s a formula that works quite well. We have a pretty good immigration policy in place right now, and if it ain’t broke, don’t fix it.

 

CEI: Let us throw a couple of names at you, and quickly tell us your thoughts. Let’s start with Paul Ehrlich.

 

SM: Discredited. This is a man who won, unbelievably, a MacArthur Foundation Genius Award a few years ago even after virtually every prediction he has made over the last 40 years has been disproven by events. Perhaps you can say that Paul Ehrlich is the wrongest man of the 20th century.

 

CEI: Milton Friedman.

 

SM: I think if Milton Friedman is not the most influential economist of the 20th century, he’s second only to Keynes in terms of his impact.  So he is a living legend. When you talk about the free-market revolution that’s happening all over the world, and I think it is happening--Milton Friedman is really the intellectual inspiration for that.

 

CEI: Steve Forbes.

 

SM: He’s a man of great political courage. He’s taken so much of a battering from the Republican establishment, but he’s the one who had the courage to put all these issues that we all care about at the forefront of the public policy debate:  term limits, school choice, Social Security privatization, the flat tax, medical savings accounts. The whole litany of free-market ideas that are so important to our country’s future were first proposed by Steve Forbes in 1996.  Although Pete DuPont talked about some of these things in 1988 as well.

 

CEI: Warren Buffet.

 

SM: I wish I could figure out Warren Buffett. I call these people, like Warren Buffet, who made all this money, who want high taxes and the death tax retained “Billionaire Bozos.” I just wish Warren Buffet understood the capitalist system better because he sure has made a lot of money off of it.

 

CEI: Alan Greenspan.

 

SM: I think you’ll have a hard time arguing against Alan Greenspan’s record. One of the reasons we’ve had such spectacular growth over the last decade has been really a spectacular monetary policy. Now, there’ve been some errors in the last year or so that have caused too much tightening of the economy. But, for the most part, when it comes to monetary policy, you can’t beat price stability. We want a policy where the dollar is as good as gold and is the world currency, and that’s what’s happened under Greenspan’s regime. I would have to give him very high marks, although I like his record a lot more than I like his rhetoric.

 

CEI: Some people, like Steve Forbes and Bob Novak, have not been so charitable toward Greenspan.

 

SM: There’s been really two Alan Greenspans. There’s the pre-1999 Green-span:  up to that point I wanted to give him a Nobel Prize in economics. I think, in the last two years, his star has faded somewhat. On the other hand, I think that some of my good supply-side friends have maybe been a bit too tough on him. Remember, the errors in monetary policy that we are talking about today are trivial compared to the errors in the 1970s. I mean, people are saying, are we 25 or 50 basis points too high or low, do we have slight price inflation? I mean, hell, when I graduated from college, we had a 13.5 percent inflation rate. Nobody in their right mind would invest for the long term with inflation rates that high. Hopefully we’ve learned our lesson and we are not going to return to the dysfunctional monetary policies we had in place in the late 1960’s and throughout the 1970’s.

 

CEI: Bill Clinton.

 

SM: Well, this might not be too pleasing to some of your readers, but I’m not an unmitigated Clinton-basher. Let’s face it, the eight years that Bill Clinton was president were some of the most prosperous years in American history.

 

CEI: Is that despite Clinton or because of him?

 

SM: That’s a good question. The things that happened under Bill Clinton, whether he supported them or not, were fairly free-market. I would give the Clinton Administration much higher marks than I would George Bush, Sr.’s. It was more free-market oriented than the Bush Sr. Administration. Look at what happened in the Clinton years, and whether it happened because of him or despite him I’m not sure.  We’ve cut the capital gains tax, we’ve cut the size of government from about 23 percent of GDP down to about 19 percent of GDP.  Clinton is the guy who reappointed Alan Greenspan twice to the Federal Reserve Board. We passed three of the most important free-trade agreements in this country’s history, and we signed one of the most important pieces of social legislation in the last half century, which was the Welfare Reform Bill. Now, most of those things I just mentioned were initiatives that were launched by Republicans in Congress, but Bill Clinton signed most of those or agreed to most of those policies. Economically, Bill Clinton was not a bad president despite his vile personal behavior.

 

CEI: Paul Krugman.

 

SM: I think he’s just a pop economist who likes to be a contrarian. If you read some of the things he’s been saying recently, he’s become kind of a class warfare crusader on tax cuts. I feel like he doesn’t really have any economic philosophy or guiding post. He likes to be controversial and likes to take potshots at free-market people like Milton Friedman and Fred Smith.

 

CEI: Henry Hazlitt.

 

SM: I love his book. I think that Economics in One Lesson should be required reading for every high school student in America.

 

CEI: Ralph Nader.

 

SM: Well, what can you say about Ralph Nader? Thank God for Ralph Nader or else Al Gore would be president today.

 

CEI: Any thought that down the road you could be the right-wing Ralph Nader?

 

SM: Well, Ralph Nader changed policy, back in the 1960s and ’70s. So it would be quite an accomplishment if I could achieve that.