A 1978 Ronald Reagan speech.
Solving problems of unemployment and inflation are often discussed in the context of what government intends to do about it. May I suggest for your consideration that government has already done too much about it? That indeed, government, by going outside its proper province, has caused many if not most of the problems that vex us.
How much are we to blame for what has happened? Beginning with the traumatic Great Depression, we the people have turned more and more to government for answers that government has neither the right nor the capacity to provide. Unfortunately, government always tends to increase in size and power.
The result is a fourth branch of government: a vast federal bureaucracy of enormous power that determines policy to a greater extent than any of us realize. And it can’t be removed from office by our votes.
To give you an illustration of how bureaucracy works in another country: England in 1803 created a new civil service position. It called for a man to stand on the cliffs of Dover with a spy glass and ring a bell if he saw Napoleon coming. They didn’t eliminate that job until 1945. In our own country, there are only two government programs that have been abolished. The government stopped making rum on the Virgin Islands, and we’ve stopped breeding horses for the cavalry.
We bear a greater tax burden to support that permanent bureaucratic structure than any of us would have believed possible just a few decades ago. When I was in college, government was taking a dime out of every dollar earned and less than a third of that paid for the federal establishment. Today, governments, federal, state, and local, are taking 44 cents out of every dollar earned, and two-thirds of that supports Washington. It is the fastest growing item in the average family budget, and yet it is not one of the factors used in computing the cost of living index. It is the biggest single cost item in the family budget, bigger than food, shelter and clothing all put together.
When government tells us that in the last year the people in America have increased their earnings 9 percent, and since the inflation is 6 percent, we’re still 3 percentage points better off, or richer than we were the year before, government is being deceitful. That was before taxes. After taxes, the people of America are 3 percentage points worse off, poorer than they were before they got the 9 percent raise. Government profits by inflation.
Inflation is caused by one thing, and it has one answer. It’s caused by government spending more than government takes in, and it will go away when government stops doing that, and not before.
Government has been trying to make all of us believe that somehow inflation is like a plague, or the drought, or the locusts coming, trying to make us believe that no one has any control over it and we just have to bear it when it comes along and hope it will go away. No, it’s simpler than that. From 1933 until the present, our country has doubled the amount of goods and services that are available for purchase. In that same period we have multiplied the money supply by 23 times. So $11.50 is chasing what one dollar used to chase. And that’s all that inflation is: a depreciation of the value of money.
Ludwig von Mises once said, “Government is the only agency that can take a perfectly useful commodity like paper, smear it with some ink, and render it absolutely useless.”
There are 73 million of us working and earning by means of private enterprise to support ourselves and our dependents. We support, in addition, 81 million other Americans totally dependent on tax dollars for their year-round living. Now it’s true that 15 million of those are public employees and they also pay taxes, but their taxes are simply a return to government of dollars that first had to be taken from the 73 million. I say this to emphasize that the people working in private business and industry are the only resource that government has.
It is time that a voice be raised on behalf of the 73 million independent wage earners in this country, pointing out that profit, property rights and freedom are inseparable, and you cannot have the third unless you continue to be entitled to the first two.
Even many of us who believe in free enterprise have fallen into the habit of saying when something goes wrong: “There ought to be a law.” Sometimes I think there ought to be a law against saying: “There ought to be a law.” The German statesman Bismark said: “If you like sausages and laws you should never watch either one of them being made.” It is difficult to understand the ever-increasing number of intellectuals, who contend that our system could be improved by the adoption of some of the features of socialism.
It all comes down to this basic premise: if you lose your economic freedom, you lose your political freedom and in fact all freedom. Freedom is something that cannot be passed on genetically. It is never more than one generation away from extinction. Every generation has to learn how to protect and defend it. Once freedom is gone, it’s gone for a long, long time. Already, too many of us, particularly those in business and industry, have chosen to switch rather than fight.
The federal government has used its taxing power to redistribute earnings to achieve a variety of social reforms. Politicians love those indirect business taxes, because it hides the cost of government. During the New Deal days, an under-secretary of the treasury wrote a book in which he said that taxes can serve a higher purpose than just raising revenue. He said they could be an instrument of social and economic control to redistribute the wealth and income and to penalize particular industries and economic groups.
What specifically should be done? The first essential for the businessman is to confront the problem as a primary responsibility. It has been said that history is the patter of silken slippers descending the stairs and the thunder of hobnail boots coming up. Back through the years we have seen people fleeing the thunder of those boots to seek refuge in this land. Now too many of them have seen the signs, signs that were ignored in their homeland before the end came, appearing here. They wonder if they’ll have to flee again, but they know there is no place to run to. Will we, before it is too late, use the vitality and the magic of the marketplace to save this way of life, or will we one day face our children, and our children’s children when they ask us where we were and what we were doing on the day that freedom was lost?