Address to the Competitive Enterprise Institute
ANA Hotel, Washington D.C.
Tuesday, October 21, 1997
Thank you, Stan [Evans]. As Bill Clinton says to each of his many promises, I won’t keep you long.
It is a pleasure to be here at CEI. It is said an institution is the lengthened shadow of one man. I’m sure we all agree that CEI is the lengthened shadow of its founder. He is one of the great policy entrepreneurs of our time. He once said that, "This saving the world business can be really exhausting." Looking at all that CEI puts out, not to mention all the places he speaks, I don’t wonder. So yes, for all you’ve done for the cause of freedom, thank you, Fred Smith.
Under Fred’s leadership, the Competitive Enterprise Institute has become home to many distinguished scholars. When the next free market administration comes to this town (I have no idea who might head it), I expect these thinkers will play a formative role in it. Let me name just three: Sam Kazman, Marlo Lewis and Jonathan Adler.
We are here tonight to honor a man who stands as one of the greatest economic and environmental journalists of our time. He was prolific. He wrote as many as three columns a week. And he was fertile: a huge number of those columns broke entirely new ground. They debunked current myths about the economy, the environment and the government. They presented original analyses that went far beyond just reporting. No wonder it is said that he was Ronald Reagan’s favorite columnist. Or that we at Forbes magazine were thrilled when he began writing his typically brilliant articles for us. Or that the Competitive Enterprise Institute was his favorite think tank. We all mourned his passing. We all celebrate his life. We all strive to carry on in his spirit. We all honor Warren Brookes.
Warren Brookes wrote of the "economy of the mind." He taught that, contrary to what so many economists had said up to then and even now, it is not resources that make for the wealth of a person or a nation. It is imagination, spirit, the will to create – a will that some say is the way in which man was made in the image of God. And though Warren is gone, his truth marches on with particular force today.
For example, take something that in material terms is almost insignificant, but is among the driving forces in our nation’s economic growth: the microchip. The microchip is made from the three most abundant substances of the crust of the earth: silicon, oxygen and aluminum. In material terms, each chip is close to worthless. It is the human imagination that has turned something constructed from these three common substances into sources of untold value.
Indeed, our new economy of the mind is best represented by the microchip. The microchip not only depends for its value on the intellect that goes into it, but it also extend the reach of the human brain the way machines extended the reach of human muscle during the industrial era. For example, even today in parts of the world, the most muscular and energetic farmers using hoes and rakes require days to cultivate as much land as an American farmer with his tractor and equipment does in a matter of minutes. So, too the microchip is, in a sense, going to make us more genius-like and open new opportunities for us all – not just in America but around the globe.
We hear some say that this new economy is only for the highly-skilled, but the truth is that no one need be left behind in the emerging labor force. People don’t have to become computer programmers or high-tech jockeys. Just look to the supermarket. (I guarantee you that presidential candidates and ex-presidential candidates make a point to visit supermarkets once in a while).
What do you see at the checkout counter? Very sophisticate inventory control equipment. But whether its lasers or wands, virtually anyone can use it. This inventory equipment is literally changing the face of modern retailing. It has enabled stores like Wal-Mart to become industry giants by using technology and the economy of the mind more creatively than others.
Taken together the fruits of this economy are changing not only how we live but how we govern. The dynamic of the Machine Age was bigness – big companies, big cities, big government, big unions. Everything was centralized. In the early days of the Soviet Union workers were even gathered in their factories for quasi-religious services, worshipping their machines and the all-encompassing state that controlled them.
The dynamic of the economy of the mind is almost Jeffersonian – pro-individual, pro-family, pro-small business. It is ready-made for the American character – and is a force supporting the values of freedom and human dignity all over the world.
Think of the role of the fax and Xerox machines in the triumph of Solidarity, the crumbling of the Soviet Union, the fall of the Berlin Wall; the protests at Tiananmen Square.
Closer to home, think of how, on a personal computer, today’s small business person can do the kinds of analyses that were once possible for only the largest corporation – and how, partly for this reason, small businesses have found that they can compete for market niches on an equal footing with large corporations.
Or think of how a family on the Internet can gain access to libraries and databanks that were once open only to the most privileged scholars – and how, again partly for this reason, the home school has become an increasingly effective alternative to the big public school.
No place in human history has been so much a home for this economy of the mind as the United States.
No place else has the human imagination had so much freedom to grow.
No place else has there been so much room to try and fail and try again.
And that is why, after almost a century of conflict, and almost sixty years of leading the free and democratic world in defeating the Nazi and communist tyrannies, America today has the potential for the greatest economic boom and spiritual renewal in global history.
The question before us is: will we realize these glittering opportunities, or will this be an era of missed opportunities.
The choices we make in governing ourselves will tell the story. At the turn of the last century, the great behemoths of our national life were the new industrial corporations.
They represented accumulations of wealth and economic power so vast that Americans feared they threatened to compromise our democracy and our progress. And so we found a president who mericans feared they threatened to had the moral courage to take on these massive centers of power. Theodore Roosevelt, who said, "Let us run the risk of wearing out than rusting out" – and Progressives of both political parties busted the trusts and reinvigorated our national life.
Today, as we prepare for the turn of a new century, we again face gigantic and powerful institutions that compromise our nation’s character – only this time the institutions are those of government.
And as it was a century ago, so today, it is time to cut them down to size.
The economy of the mind is giving us an unparalleled opportunity to do just that – if our leaders can summon the kind of moral courage and dedication to the strenuous life that Theodore Roosevelt championed so vividly.
The American people have that kind of moral courage. The rise of groups like the Promise Keepers, who have returned dedication to God and family back to the public square, or groups like you here tonight, dedicated to free markets not because it is in your interest but because it is right. Large and small, the flowering of groups such as these shows a stirring in the land – but that stirring has missed too many of our leaders. We all know it. We all see it. The defining characteristics of politics in our time is a loss of moral courage.
Our President lacks a compass and a core. Our Vice President recognizes no controlling legal authority. Our Congressional leadership is neck deep in compromise… captive of its doubts.
The budget deal is a symbol – a patchwork of small victories, purchased by the violation of great principles. Its miserly tax relief is "phased in." The marriage penalty remains in place, punishing commitment and responsibility. Not one government program or department is eliminated. Not the Commerce Department. Not the National Endowment for the Arts. Not even the international popcorn promotion program. On the contrary, federal spending is dramatically increased to education bureaucracies that betray the young, and welfare bureaucracies that betray the poor.
If this is the culmination of the conservative revolution – as its defenders contend — it will be a failure, remembered as a footnote.
The goal of politics is not to shine in the light of passing praise. The goal of politics is to match power with purpose. It is to give our nation a destination. It is to reveal, not only what can be done, but what ought to be done, and to turn those responsibilities into realities.
Rather than the anemic budget deal on the table, we should be proposing an end to the current tax code and the final days of the IRS itself. Today’s IRS is not only arbitrary and heartless (since the Clinton Administration took office, auditors have targeted poor people, those with incomes under $20,000 a year). It is something even more disturbing. For example, last December, a California physician – Dr. William Ellis – had the temerity to write an article for Investors Business Daily criticizing the Food and Drug Administration. He was then mentioned in a Wall Street Journal piece that linked approval for one company’s medical device ahead of a competing company’s with a campaign contribution to Senator Ted Kennedy. Within 30 days the IRS was auditing him. He received anonymous phone calls telling him to "cool it", normal IRS procedures were by-passed and he was assessed $18,000 in new taxes without ever meeting the agent. The recent IRS hearings revealed a pattern of arrogant abuses that should never occur in a free country.
Rather than tinker with a failed tax system, let’s abolish it, kill it, drive a stake through its heart, bury it, and hope it never rises again to terrorize the American people.
This is about more than the value of our paychecks. It is about the values of our nation – because there are faces beyond the figures. After my campaign last year, I sat on a plane next to a machinist who worked for one of the airlines. He told me he’s married, has two children and earns a good wage. But it’s not enough. Both he and his wife have to work part-time, out of necessity. And he’s afraid his children are feeling the loss.
The reason? After federal income taxes, federal payroll taxes, state income taxes, sales taxes, property taxes, gasoline taxes, utility taxes, he figured out that over half his income goes to government in taxes and fees. Over half. And that burden is measured in worry and insecurity and stolen family time.
Just imagine how different it would be with a 17 percent flat tax, with exemptions of $13,000 for each adult and $5,000 for each child. A tax return filled out on a postcard. No tax on savings or social security.
The tax code, as we know it, is one way that government jeopardizes the full flowering of the economy of the mind – but not the only one.
Excessive, abusive regulations don’t directly affect the budget – it doesn’t cost much to print decrees in the Federal Register. But they can have a profound impact on our lives. The U.S. government’s regulations on the sale of cabbages…cabbages…total 27,000 words.
Today’s regulators classify children’s teeth as toxic waste. They force banks to make teller machines accessible to blind drivers. They dictate that hard hats must be disinfected before each use. They require employers to inform employees about the hazards of coming into contact with Joy dish washing liquid.
They impose on our economy and our future a burden equal to about one-third of the tax code itself… a burden so arbitrary that more than half of the heads of mid-sized companies – the home turf of the economy of the mind – have called government regulation their single biggest challenge, outranking even taxes themselves. But more than in dollars, we can count the cost of over-regulation in the quality of lives.
If we are to win that sparkling future for this land we love, we must have the moral courage to speak the truth – which is that, all too often, regulation is not making lives better, safer;" healthier, but just the opposite.
A good place to start would be telling the truth about the Food and Drug Administration: the time the FDA takes to approve new drugs is killing people. Even greater than the microchip revolution is the biotech revolution – another of the fruits of the economy of the mind. Much of the biotech revolution started here, in the United States, but thanks to the FDA, America is far from the world leader in introducing new pharmaceuticals. The FDA takes years longer to approve a new drug than the British, Germans, or Japanese – none of them known for recklessness – and so many drugs developed here are first introduced over there.
It is time we asked: How many tens of thousands of Americans have died waiting for FDA to approve the heart-attack drug TPA? Or for the gastric-ulcer drug misoprostol? Or any of dozens of other drugs? Recently the FDA has accelerated approval of AIDS and cancer drugs – and that’s good. But why just AIDS and cancer, except that concerned groups are vocal and well organized? For the FDA to grant reform patient group by patient group is just playing political games with human lives.
Tonight, as we meet, former President Reagan languishes, a victim of Alzheimer’s. Perhaps there is a treatment or even a cure somewhere in a laboratory or testing. I don’t know. But, if their doctor says there is, his family should be able to try it, no matter what the FDA says. And, in similar circumstances, so should any family in America.
Beyond FDA reform, it is time to summon moral courage and take on the regulation of healthcare generally. For example, Medicare must be fixed from the hideous provision in the recent budget deal. The provision makes it virtually illegal for a doctor to treat seniors on a private basis. It will be just about unlawful for people who want to avoid Medicare’s price controls and bureaucracy to pay for care out of their own pockets. In fact, doctors must sign an affidavit stating that even if they treat only one privately-paying patient over 65 they will not treat any Medicare patients for the next two years.
Are we to have FBI agents stalking physicians? If your mother wants treatment that Medicare doesn’t cover, will it be a crime for her doctor to give it to her? If she has a federally-sponsored Medical Savings Account, will it be all but impossible to find a doctor willing to treat her? This regulation is a direct assault on the doctor-patient relationship and a disgusting throwback to the age of "big knows best."
Our Congressional leaders should stop this travesty – and then take the first step towards complete patient control of healthcare…by making Medical Savings Accounts available to everyone.
Environmental regulations have also become an area of abuse. Worthy goals have been used as cover for certain rules that do more harm than good.
For example, the Endangered Species Act has almost entirely failed to return endangered species to the list of those that are safe.
On the other hand, it has been spectacularly effective at empowering bureaucrats to stop people from building homes and roads, plowing fields, felling trees and protecting their homes and families from fires.
Several years ago fires swept through a coastal California community, destroying many homes. It turned out that those homes could have been safe from fire. But for some time, despite protests, officials had prohibited the clearing of dry brush from the yards. The officials wanted to protect a variety of rat.
Surely those who passed the Endangered Species Act thought of it as benign – save eagles and furry creatures. But they wrote the legislation so vaguely that bureaucrats were left with carte blanche.
Vague drafting, perverse incentives, invitations to bureaucratic power grabs and failure to protect the environment run through our environmental law. The Superfund law, for example, has produced few cleaned up sites, but has made many lawyers rich and emptied out entire urban industrial areas. After all, who wants to own land that may expose you to Superfund liability? But when industry is driven out, drugs and crime move in. So those neighborhoods aren’t safer, thanks to the law. Their lives become more dangerous.
Let me give you another example of what I’m talking about: the air quality standards that Mr. Clinton recently approved caught Congress by surprise. The rules for airborne particles are so extreme that backyard barbecuing may, in many places, become illegal. EPA’s excuse is that it wants to protect children with asthma. But ozone and particulate matter levels have fallen even as the asthma rates have climbed. The asthma increases followed the tighter sealing of houses during the 1970s. Sealing left asthma sufferers to contend with more indoor dust and mold.
The air quality rules are expected to cost the nation between $60 billion and $150 billion a year, mostly paid by small businesses, car owners and consumers. In other words these regulations won’t do good, but they could do a great deal of harm.
The only surprise in all this is that Congress was surprised. You wonder where they’ve been all these years? They drafted the law so as to give EPA its head. Haven’t they learned? When the EPA gets its head, it’s usually off with everyone else’s.
The worst is yet to come. Like an El Nino forming in the western Pacific, the Administration is moving to conclude a global warming agreement in Kyoto, Japan. The idea is to stop global warming by cutting the developed world’s CO2 emissions back to 1990 levels by as early as 2010.
Never mind that satellite data suggest the globe may be cooling…or that climate scientists aren’t certain what the globe is doing over the long run – getting warmer or cooler.
And never mind that the mathematical models on which long-run predictions of global warming rely can’t quite predict the past… or even, dependably, next week.
The White House’s own economists estimate that achieving that goal could require raising gas prices 50 cents a gallon and pushing up electric bills by 20 to 40 percent, in other words a tax increase of $100 billion to $200 billion a year. Do we want Al Gore rationing our gasoline?
If that’s not bad enough, exempting the developing world (as the treaty does) means that the treaty will result in more pollution, not less. In America – thanks to our productivity as well as our laws – industries are getting cleaner. The most polluted air on earth is in China. But if the Clinton-Gore Administration keeps on this course, many heavy U.S. industries will have to move to exempt countries, just to have access to the basic energy required to operate. In other words, this policy amounts to packing-up clean U.S. factories and shipping them to China and other exempt countries, where they will become dirty factories when they are unpacked. How dumb can that be?
Well, actually, there is something about the Administration’s plan that is even dumber: that is that the U.S. will be classified as a polluter, while China and countries like it will be classified as clean – and we will have to buy pollution credits from them. In other words, we will be required to subsidize the developing world’s pollution.
Now, this sounds like a treaty that could never win Senate approval. But already there is speculation that the treaty will never be submitted to the Senate. Instead vague language will come out of Kyoto, which EPA will then use as a screen for reinterpreting our often vague laws and issuing a string of increasingly strict regulation – untouched by Congress’ hands.
The great philosopher and economist Frederick Hayek said that the road to serfdom was marked by legislatures ceding power to bureaucracies, as the size and complexity of government becomes too much to supervise. I read Hayek and said, "What a nightmare." Apparently the President read him and said, "What a good idea."
It is time to get off that road and require a vote of Congress before any agency regulations can go into effect.
And it is time to challenge the socialist assumptions that dominate environmental activist circles today.
For example, it’s time to say that environmental problems are the result, not of too many private rights, but of too few. For example, in parts of Africa where elephants are off limits to man, poaching is rampant and herds are shrinking. But in Africa, where people are allowed to make commercial use of elephants, former poachers have become game wardens and herds have expanded. The market works.
It’s also time to say that richer is cleaner. Wealthy nations find ways to clean up their environments. Poor nations pollute. Green lobbyists promoting no-growth policies are the enemies of environmental progress, not its friends.
In fact, market-driven innovation is the chief source of environmental progress, although government agencies are better at taking the bows. Fred Smith has pointed out to me that increases in forestry and agriculture have done more to slow land conversion and preserve habitat than all government programs combined including protected forests and wildlife areas. Regulatory schemes that lock existing technology in place only delay progress toward a cleaner world.
To solve our environmental problems, we must take the traditional American, let’s-get-the-job-done approach.
Openness to new, market-driven technologies and respect for private property are too often missing from deregulation, as well as regulation.
For example, Congress deregulated telecommunications… a good thing. But it failed to allow telephone and cable companies to join in providing a high capacity line into homes. So, as matters stand today, the Internet is right outside your house, but only a small part of it can squeeze through the door.
Respect for private property, respect for markets (which, remember, are people), respect for the human spirit and imagination, respect for community and faith; these are the hallmarks of the new economy of the mind and the new age it promises.
We should draw strength from the knowledge that America is entering this new age, not because of politicians and bureaucrats, but because of our true enduring strength – the American people.
I believe that the people are waiting for their leaders to show the moral courage to break from the old assumptions, the old "big is best" ways, and to catch up with them.
I am an optimist, and I believe you are, too. I believe that when historians look back on this period they will conclude that the American people once again showed the way… once again our nation had a new birth of freedom… once again it disproved the critics, the skeptics, the doubters, the naysayers, the negativists… once again it resumed its place – its rightful place – as the leader and inspiration of the world.