Though the United States has not adopted central economic planning, we have gone very far in the past fifty years in expanding the role of government in the economy. That intervention has been costly in economic terms. The limitations imposed on our economic freedom threaten to bring two centuries of economic progress to an end. Intervention has also been costly in political terms. It has greatly limited our human freedom.
The United States remains a predominantly free country—one of the freest major countries in the world. However, in the words of Abraham Lincoln's famous "House Divided" speech, "A house divided against itself cannot stand. . . . I do not expect the house to fall, but I do expect it will cease to be divided. It will become all one thing or all the other." He was talking about human slavery. His prophetic words apply equally to government intervention into the economy. Were it to go much further, our divided house would fall on the collectivist side. Fortunately, evidence grows that the public is recognizing the danger and is determined to stop and reverse the trend toward ever bigger government.
All of us are affected by the status quo. We tend to take for granted the situation as it is, to regard it as the natural state of affairs, especially when it has been shaped by a series of small gradual changes. It is hard to appreciate how great the cumulative effect has been. It takes an effort of the imagination to get outside the existing situation and view it with fresh eyes. The effort is well worth making. The result is likely to come as a surprise, not to say a shock.
An essential part of economic freedom is freedom to choose how to use our income: how much to spend on ourselves and on what items; how much to save and in what form; how much to give away and to whom. Currently, more than 40 percent of our income is disposed of on our behalf by government at federal, state, and local levels combined. One of us once suggested a new national holiday, "Personal Independence Day—that day in the year when we stop working to pay the expenses of government . . . and start working to pay for the items we severally and individually choose in light of our own needs and desires." In 1929 that holiday would have come on Abraham Lincoln's birthday, February 12; today it would come about May 30; if present trends were to continue, it would coincide with the other Independence Day, July 4, around 1988.
Of course, we have something to say about how much of our income is spent on our behalf by government. We participate in the political process that has resulted in government's spending an amount equal to more than 40 percent of our income. Majority rule is a necessary and desirable expedient. It is, however, very different from the kind of freedom you have when you shop at a supermarket. When you enter the voting booth once a year, you almost always vote for a package rather than for specific items. If you are in the majority, you will at best get both the items you favored and the ones you opposed but regarded as on balance less important. Generally, you end up with something different from what you thought you voted for. If you are in the minority, you must conform to the majority vote and wait for your turn to come. When you vote daily in the supermarket, you get precisely what you voted for, and so does everyone else. The ballot box produces conformity without unanimity; the marketplace, unanimity without conformity. That is why it is desirable to use the ballot box, so far as possible, only for those decisions where conformity is essential.
As consumers, we are not even free to choose how to spend the part of our income that is left after taxes. We are not free to buy cyclamates or laetrile, and soon, perhaps, saccharin. Our physician is not free to prescribe many drugs for us that he may regard as the most effective for our ailments, even though the drugs may be widely available abroad. We are not free to buy an automobile without seat belts, though, for the time being, we are still free to choose whether or not to buckle up.
Another essential part of economic freedom is freedom to use the resources we possess in accordance with our own values— freedom to enter any occupation, engage in any business enterprise, buy from and sell to anyone else, so long as we do so on a strictly voluntary basis and do not resort to force in order to coerce others.
Today you are not free to offer your services as a lawyer, a physician, a dentist, a plumber, a barber, a mortician, or engage in a host of other occupations, without first getting a permit or license from a government official. You are not free to work overtime at terms mutually agreeable to you and your employer, unless the terms conform to rules and regulations laid down by a government official.
You are not free to set up a bank, go into the taxicab business, or the business of selling electricity or telephone service, or running a railroad, busline, or airline, without first receiving permission from a government official.
You are not free to raise funds on the capital markets unless you fill out the numerous pages of forms the SEC requires and unless you satisfy the SEC that the prospectus you propose to issue presents such a bleak picture of your prospects that no investor in his right mind would invest in your project if he took the prospectus literally. And getting SEC approval may cost upwards of $100,000-which certainly discourages the small firms our government professes to help.
Freedom to own property is another essential part of economic freedom. And we do have widespread property ownership. Well over half of us own the homes we live in. When it comes to machines, factories, and similar means of production, the situation is very different. We refer to ourselves as a free private enterprise society, as a capitalist society. Yet in terms of the ownership of corporate enterprise, we are about 46 percent socialist. Owning 1 percent of a corporation means that you are entitled to receive 1 percent of its profits and must share 1 percent of its losses up to the full value of your stock. The 1979 federal corporate income tax is 46 percent on all income over $100,000 (reduced from 48 percent in prior years). The federal government is entitled to 46 cents out of every dollar of profit, and it shares 46 cents out of every dollar of losses (provided there are some earlier profits to offset those losses). The federal government owns 46 percent of every corporation—though not in a form that entitles it to vote directly on corporate affairs.
It would take a book much longer than this one even to list in full all the restrictions on our economic freedom, let alone describe them in detail. These examples are intended simply to suggest how pervasive such restrictions have become.
Restrictions on economic freedom inevitably affect freedom in general, even such areas as freedom of speech and press.
Consider the following excerpts from a 1977 letter from Lee Grace, then executive vice-president of an oil and gas association. This is what he wrote with respect to energy legislation:
As you know, the real issue more so than the price per thousand cubic feet is the continuation of the First Amendment of the Constitution, the guarantee of freedom of speech. With increasing regulation, as big brother looks closer over our shoulder, we grow timid against speaking out for truth and our beliefs against falsehoods and wrong doings. Fear of IRS audits, bureaucratic strangulation or government harassment is a powerful weapon against freedom of speech.
In the October 31 [19771 edition of the U.S. News & World Report, the Washington Whispers section noted that, "Oil industry officials claim that they have received this ultimatum from Energy Secretary
James Schlesinger: Support the Administration's proposed tax on crude oil—or else face tougher regulation and a possible drive to break up the oil companies.' "
His judgment is amply confirmed by the public behavior of oil officials. Tongue-lashed by Senator Henry Jackson for earning "obscene profits," not a single member of a group of oil industry executives answered back, or even left the room and refused to submit to further personal abuse. Oil company executives, who in private express strong opposition to the present complex structure of federal controls under which they operate or to the major extension of government intervention proposed by President Carter, make bland public statements approving the objectives of the controls.
Few businessmen regard President Carter's so-called voluntary wage and price controls as a desirable or effective way to combat inflation. Yet one businessman after another, one business organization after another, has paid lip service to the program, said nice things about it, and promised to cooperate. Only a few, like Donald Rumsfeld, former congressman, White House official, and Cabinet member, had the courage to denounce it publicly. They were joined by George Meany, the crusty octogenarian former head of the AFL-CIO.
It is entirely appropriate that people should bear a cost—if only of unpopularity and criticism—for speaking freely. However, the cost should be reasonable and not disproportionate. There should not be, in the words of a famous Supreme Court decision, "a chilling effect" on free speech. Yet there is little doubt that currently there is such an effect on business executives.
The "chilling effect" is not restricted to business executives. It affects all of us. We know most intimately the academic community. Many of our colleagues in economics and the natural science departments receive grants from the National Science Foundation; in the humanities, from the National Foundation for the Humanities; all those who teach in state universities get their salaries partly from the state legislatures. We believe that the National Science Foundation, the National Foundation for the Humanities, and tax subsidies to higher education are all undesirable and should be terminated. That is undoubtedly a minor ity view in the academic community, but the minority is much larger than anyone would gather from public statements to that effect.
The press is highly dependent on government—not only as a major source of news but in numerous other day-to-day operating matters. Consider a striking example from Great Britain. The London Times, a great newspaper, was prevented from publishing one day several years ago by one of its unions because of a story that it was planning to publish about the union's attempt to influence the content of the paper. Subsequently, labor disputes closed down the paper entirely. The unions in question are able to exercise this power because they have been granted special immunities by government. A national Union of Journalists in Britain is pushing for a closed shop of journalists and threatening to boycott papers that employ nonmembers of the union. All this in the country that was the source of so many of our liberties.
With respect to religious freedom, Amish farmers in the United States have had their houses and other property seized because they refused, on religious grounds, to pay Social Security taxes— and also to accept Social Security benefits. Church schools have had their students cited as truants in violation of compulsory attendance laws because their teachers did not have the requisite slips of paper certifying to their having satisfied state requirements.
Although these examples only scratch the surface, they illustrate the fundamental proposition that freedom is one whole, that anything that reduces freedom in one part of our lives is likely to affect freedom in the other parts.
Freedom cannot be absolute. We do live in an interdependent society. Some restrictions on our freedom are necessary to avoid other, still worse, restrictions. However, we have gone far beyond that point. The urgent need today is to eliminate restrictions, not add to them.
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