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A Rare Moment of Candor

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President Bush says he’s got the economy under control. That’s supposed to comfort us.

I’d feel better if he said he had the federal government under control. It’s spending wildly — and it can’t blame the “war on terrorism” for it all. That’s just the latest spending. We are in for a federal soaking for as far as the eye can see. Social Security, Medicare: those two programs alone have created a $25 trillion unfunded liability. The people hoping for those benefits have to pray the taxpayers will continue to be chumps. That’s how all chain letters work.

It shrinks Enron and WorldCom back into perspective, doesn’t it? The government wrote the book on cooking the books. The politicians talk the talk, but they never seem to walk the perp walk. That’s because unlike businessmen, politicians first legalize their crimes. To appropriate Mel Brooks’s great movie line, “It’s good to be the president or congressman.”

Incidentally, the businessmen forced to take the perp walk on national television are only accused, not convicted, and they are pleading not guilty. We know the politicians are guilty.

Mr. Bush can make his outrageous statement because we Americans have been indoctrinated into believing that the president is supposed to control the economy. That’s free enterprise! I’m waiting for the Chamber of Commerce and National Association of Manufacturers to politely object, but I will not be holding my breath. We’re all socialists now.

Okay, not socialists in the sense of nationalizing all the means of production. That’s where Marx and his ilk blew it. Those dolts thought they had to run the entire economy. As a result, the governments they favored spread themselves too thin, and it was only a matter of time before they collapsed.

Savvier socialists understand that, as with so many things in life, less is more. To engineer a society, you don’t need to run everything — just hold a few key command posts. The top three posts are the money supply, people’s incomes, and education. Hence, we have the Federal Reserve System, the income tax, and the so-called public schools. There may be others worth seizing, but these get you a good distance toward running virtually every aspect of society.

Here’s the Fed’s legacy: what you could buy for a dollar in 1913, when the Fed was created, would cost about 18 dollars today. By inflating the money supply, the government can manipulate the economy for political gain and secretly tax us in the process. In theory, of course, the Fed is independent. But in fact presidents have often been able to lean on the Fed chairman to get their way. An infusion of freshly created money can bring an economic boom in time for a reelection campaign. Unfortunately, busts follow booms. The economic business cycle is really a political business cycle. Presidents get the Fed chairman to cooperate by telling him that failure to do so might jeopardize his independence. Orwell lives.

If you’re wondering why the stock market has been so bad in recent years (“greed” is presumably a constant), take a look at the Fed’s money-growth figures. Alan Greenspan and his colleagues created money like mad in the late 1990s. All binges end.

The income tax gives the government unlimited access to our wealth. It’s doubtful so much money could be raised with a sales tax. There were only two reasons for passing the income tax in 1913: envy and the politicians’ lust for money. In recent years some politicians have learned that tax rates above a certain level are counterproductive and revenues fall. So we’ve had modest tax-rate cuts. Nevertheless, the government sucks up a record percentage of our wealth, not counting the levels reached during the world wars.

Finally, the government runs the schools mainly to assure we don’t object to the other two interventions and to make us believe it’s protecting us — rather than itself — when it goes to war. Public schools began local, but note how federal “influence” has accelerated for decades. This lets Washington set the agenda.

The upshot is that when Mr. Bush says he has the economy under control, he’s given us a rare moment of candor. But we shouldn’t be calmed.

Sheldon Richman is senior fellow at The Future of Freedom Foundation in Fairfax, Va., and editor of Ideas on Liberty magazine.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.