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OPINION
Page 4
Saturday, September 8, 1984
The Michigan Daily
be dadtudensaUichigan I
Edited and managed by students at The University of Michigan
Another not-so- funny joke
4
Vol. XVC; No. 3
420 Maynard St.
Ann Arbor, MI 48109
Editorials represent a majority opinion of the Daily's Editorial Board
Not enuhsriht talk
T IS TIME for President Reagan to
start talking about taxes. Not about
how he won't raise them if elected, but
about how he will. There is little doubt
that an increase will be necessary
following the election. With the
ominous deficit and no proposed cuts in
spending, the Reagan administration
should do the voters a favor by ex-
plaining how such a lopsided budget
can be balanced.
But that's the problem: The ad-
ministration is not interested in ex-
plaining a bad word like "taxes" to the
American puiblic. Economists and
even key Republican members of
Congress and the President's cabinet
concede the inevitability of a tax in-
crease. So how could President
Reagan say last month that "we have
no plans for, nor will I allow any plans
for, a tax increase"? He was able to
say that because he has no interest in
exposing the tax question to the voters.
On the same day, when Vice President
George Bush said "any President
would keep his options open" on taxes,
Reagan's insincerity was made pain-
fully obvious. While Reagan was
spouting hollow rhetoric, the Vice
President was talking common sense.
A week later the President
acknowledged that "A President of the
United States should never say never"
and set the pattern for his method of
dealing with the tax issue. Reagan has
offered nothing substantive to the deb-
ate and remains content to say only
what is politically popular.
It is time for the tax issue to come
out of the dark. How can Reagan con-
tinue to assert that no taxes are
necessary in view of the deficit and no
proposed cuts in spending? And if they
were raised, how would it be done?
Would the burden be distributed to all
income levels-would the poor benefit
or the rich.
The President hasn't paid a political
price for taking such an irresponsible
stand because he is saying precisely
what the voters want to hear. Reagan
likes to talk, but talk is cheap. He says
he wants a balanced budget and voters
like to hear that, but where are the
concrete committments to such a
goal? The President has bred an at-
mosphere of dangerous optimism,
dangerous because it is unfounded.
The deficit stands in the way of long-
term recovery and makes a mockery
of the wish to balance the budget.
"Taxes" should be greeted as a
painfully necessary word, not ignored
as a politically unpopular one. The
debate should begin in earnest, and not
behind Reagan's back.
By Brian Leiter
Has anyone noticed to what ex-
tent the entire Reagan economic
philosophy is based on a bad joke?
The joke goes something like
this:
Voter: Hey, Ron, what's
America's problem?
Ron: Too much government.
Voter: So what's the solution?
Ron: More capitalism of cour-
se.
This exchange isn't particularly
funny until one realizes that the
perspective it reflects is com-
pletely ass-backwards. It seems
that Ronald Reagan missed out
on two other key dialogues held
notably in 1933 and 1964.
What was the thrust of these
dialogues? They went something
like this: it is pretty clear that
capitalism, left to its own
devices, is a social and economic
disaster-it impoverishes
anywhere from 25 to 30 percent of
the population; it annually
throws into unemployment as
much as 30 percent of the work-
force; it generates gross
material inequalities (currently 1
percent of the population owns 26
percent of the non-farm wealth,
and that's a dramatic im-
provement over the pre-New
Deal days!); and it
systematically excludes large
segments, of the population from
the basic necessities like food,
housing, and medical care. If we
are to preserve any sort of stable
social fabric (and even the
capitalists want that), the gover-
nment is going to have to take
steps to counteract the normal
route of a free-market economy.
In short, capitalism is the
problem and government is the
solution.
THUS ONE CAN either laugh
or cry when Ronald Reagan
comes along and announces that
if we just give the capitalists a
few more tax breaks and a freer
hand, the poor will move out of
poverty, the unskilled will be
trained, the unhealthy will get
medical care, and the hungry will
be fed. In fact, the whole reason
the government programs
Reagan assails came into
existence was because
historically the free-market
never affected any of these
things.
But the worst joke of all is
about to be played on voters un-
der the guise of the "Reagan
economic recovery." What does
economic recovery consist of:
First, there is low inflation. Of
course, only the most diehard
Reagan propagandists would
claim that the low inflation is not
attributable primarily to three
factors: the recession, a good
crop in 1983, and a world oil glut
which stabilized oil prices. Of the
three, only the recession might
fairly be attributed to
Reaganomics.
What of the recent decline in
unemployment? Yes, it is there.
Yet that decline coincided neatly
with two other phenomena: first, a
sharp decrease in the number of
people entering the job market in
the 1980s (about 20 percent fewer
people by 1985 than in 1975); and
second, a decrease in 1983
average unit labor costs (the first
decline since 1965). If people are
getting paid less, it should be no
surprise that more are working.
Unemployment, by the way, is
still higher than when Carter left
office.
WHAT OF THE great Reagan
tax breaks for the private sector?
They too, fall short of their
promise. After Reagan's tax sub-
sidy for corporations and the
rich, there was no increase in
productive investments. (Of
course, anyone who witnessed the
30 percent reduction in corporate
tax rates during the 1970s and the
corresponding decline in invest-
ments would have expected no
more from the Reagan proposal.)
Whatever upswing in investmen-
ts there has been more recently
was achieved through tried and
true Keynesian methods: gover-
nment fueling of the economy.
When the government overspen-
ds by 200 billion dollars a
year-as Reagan has done-it
would be a great surprise if the
economy were not stimulated!
Even if anyone is
"recovering," it would be a good
idea to ask "who?" It is certainly
not the 35 to 40 million im-
poverished (the highest number
since the early 1960s); and cer-
tainly not the eight million
familied who in the past five
years have fallen out of the mid-
dle class (incomes from $17,000 to
$41,000); nor are blacks who, ac-
cording to a National Urban
League report released earlier
this year, are actually worse off
v
economically; nor are the
millions of hungry and
malnourished-despite Ed
Meese's words of en-
couragement.
"But what of the liberal
record?" Reaganites retort.
"Certainly no one would have
bought Reagan's line if
liberalism had worked." Of cour-
se, there is some truth to that: if
the New Deal and Great Society
had really delivered on all their
promises, Reagan's attack would
have been written off as groun-
dless. The strange thing is that
when we look at the extent of
government activities in oft-
hailed competitors like West4
Germany and Japan, we can only
conclude that even the liberal
agenda is shockingly conser-
vative by contemporary global
standards. In short: perhaps our
problem is still too much
capitalism.
If Ronald Reagan were. an
honest man, his 1980 dialogue
would have gone like this :
Voter: Hey, Ron, what'
America's problem?
Ron: Government has been
making it too tough for rich white
folks to make money.
Voter: So what's the solution?
Ron: We'll just have to pretend
that it's good for everybody when
rich folks make money.
Of course, honesty like that
doesn't win elections. But,
strangelyenough, bad jokes do.
1
Leiter is a graduate student
in law and philosophy.
Doomed from the start
OME ON, lighten up everyone.
The new CRISP location isn't
that bad. It may have been a bit
frightening on Thursday when the line
of drop/adders filled the hall and then
stretched back to the fishbowl, but rest
assured that things are getting better
already. In fact, it probably won't be
that crowded again until at least
December when it comes time to
register for the winter term. So relax.
The new location in Angell Hall is
centrally located but it seems unfor-
tunate that it was chosen over some of
the more attractive locations on cam-
pus. The eighth floor of Burton
Memorial Tower has at least as much
room, and there you could listen to the
carillon playing over all of the noise.
Or what about the dental school? In-
stead of disturbing classes in Angell
Hall, the waiting throngs could offer
their mouths to dental students and
get a checkup in the process.
The truth of the matter is that,
regardless of location, CRISP will
always be an ordeal. The University
could move registration to the Alaskan
tundra and the line would be 200 yards
long and the courses you wanted would
still be closed.
It is the University student's fate to
stand in line at least twice a year. It's
probably best to just grin and bear it.
The small business recovery
By John Critchett
As the November election ap-
proaches, we will be constantly
reminded of the economic
recovery. Much of the real
recovery has been felt by the
nation's small businesses. In
1983, 600,000 small businesses
were started. During that year,
small business income grew 18
percent while wage and salary
income grew just 6 percent.
This is good news for por-
prietors and partners. but why
should the wage earning em-
ployees care? There are several
reasons. First, and most impor-
tant, is the number of jobs
gained. Between 1980 and 1982,
small businesses produced a net
gain of 2,650,000 jobs. During the
same period, larger businesses
produced a net loss of 1,665,000
jobs. Simply put, it is small
businesses, not steel mills, which
are putting America back to
work.
THE GROWTH of small
business formations also reaf-
firms that there is still a niche for
the kind of simple competition
which the free-market theorists
so admire. This is an age when
your favorite movie could be
made by the same company that
sells you soft drinks (guess which
company that would be). It is
nice to know that you might still
recognize the owner of your
neighborhood grocery store.
So how can we encourage
else. They will usually be content
to earn 50 cents rather than a
dollar. It is worth 50 cents in or-
der to avoid being told what to do.
But why only 600,000 new
businesses? While that is a huge
jump from the 1973 figure of
329,000, it still represents only one
new business for every three
hundred Americans. One reason
is risk aversion.. Individuals as
well as corporations tend to avoid
risk and to pool it whenever
possible. A new business is a
risky undertaking and en-
trepreneurs can't count on a
steady income. Ironically,
however, the recession of '81 to '82
may have reduced the relative
risk of starting a new business.
When companies scaled down
their operations, many middle
managers found that their cor-
porations didn't offer them any
income.
ANOTHER FACTOR which
limits entrepreneurial activity is
a genuine lack of imagination.
Most people acquire some formal
education where they have
teachers who tell them what to
study, and then they go to work
where they have bosses who tell
them what to do. In the process,
no one encourages them to
develop their creative abilities. It
should come as no surprise that
many of the country's most suc-
BLOOM COUNTY
cessful entrepreneurs were high
school drop-outs who quit their
jobs.
One test of whether a person is
fully using his creative abilities is
to ask him what he does in his
spare time. If it's opening a can
of beer and watching Howard
Cosell, the person is not likely to
be a budding entrepreneur. Ask
yourself what you would do if you
had to spend next weekend all by
yourself. How long would it be
before you turned on the T.V. set?
Almost any activity can be
created if it requires thinking.
When was the last time you wrote
a letter? You probably have a
huge telephone bill, because you
know that it requires less thought
to call than to write.
Another hindrance to the for-
mation of small business is
protective and discriminatory
policy of government. Federal
and state usury laws, for instan-
ce, are insupportable on
economic grounds. If a person is
certain that he can turn $1 into $2,
then he should be willing to pay
up to 100 percent interest to
borrow a dollar. But such a loan
is considered "usurious" and
would be voidable by the debtor.
Paradoxically, corporations are
not subject to usury laws. This is
one reason why big banks lend
billions of dollars to third world
countries, but not to the corner
grocery store. It is anybody'.
guess how much interest the third
world countries are promising to
pay on the loans. The best way to
compensate for risk aversion is to
offer higher interest.
The most important point about
small busnesses may not be
receiving much press. It is that
the qualities needed by a suc-
cessful entrepreneur, ideas and
raw talent, are racially, and
culturally neutral. A true en-
trepreneur is his own boss, and,
by definition, you can't
discriminate against yourself.
This is not to say, however, that 4
there is not discrimination in len-
ding behavior. Creative in-
dividuals of all backgrounds
should wake up to the possibility
that they could be successful en-
trepreneurs. Government should
realize that if a person is smart
enough to have an idea for a new
business, he should be smart
enough to write his own lending
contract and agree to pay
whatever interest the parties to
the contract deem appropriate.
Critchett is a graduate
student in business ad-
ministration.
by Berke Breathed
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