The wealth of technology.
The virtue of debt.
The death of taxes.
Bring on the Gildered Age.
Ok, so he signs our paychecks. But even if he didn't, George Gilder would top our list of people whose ideas are worth a million times more than the paper they're printed on.
George walks the leading edge as comfortably as most people pedal an exercise bike. He defined the '80s with Wealth and Poverty and The Spirit of Enterprise, siren songs to what we now know as the Reagan revolution. Microcosm and The Death of Television opened the door on tectonic shifts in technology that erupted into the open as the Roaring Nineties and the New Economy. Last fall's best-selling Telecosm looks to the new century already upon us, and its bit-filled global rivers of fiber and air—home turf for readers of the monthly Gilder Technology Report.
Lots of people understand the power of free markets, entrepreneurs, and risk capital. Lots of people understand the prodigal technologies that are re-making our world. George commands both, along with a fearlessness about saying what he thinks rooted in a fierce regard for human freedom as the ultimate engine of wealth. Let no sacred cow go ungored.
We at Gilder Publishing joined The American Spectator to broaden both our audience and the terrain we cover—technology, the economy, culture and politics. An equally wide-ranging talk with George will be an annual event, unpredictable and cornucopian. Enjoy.
THE AMERICAN SPECTATOR: So what do you think of Bush so far?
GEORGE GILDER: I think he has been polled.
TAS: "Polled"?
GILDER: I was brought up on a farm, with cows. To "poll" a cow you cut off its horns, with the result that it can't really maneuver well or defend itself against its enemies. That's what the pollsters have done to Bush. The details of the core administration policies—the tax cut, the budget, education—were designed by pollsters, or people who take polls seriously. As a result they are unprincipled, ineffective, and indefensible, and imperil his presidency.
TAS: Any top political operative will argue that polls are crucial.
GILDER: Polls work for Democrats. Democrats essentially buy their way into office, by putting together coalitions of fiercely engaged interest groups who could not survive without government subsidies. For Democrats, polls are like menus; polls help Democrats take orders to ensure the crucial interest groups are satisfied.
Republicans who try to beat the Democrats on their own turf of interest-group politics are doomed. Republicans have to win by being leaders. If they kowtow to public opinion polls they become followers, and in the end they arouse the contempt of the public, and they can even be beaten by Democrats.
TAS: Let's get specific. What's wrong with, say, the tax cut?
GILDER: It's meaningless. There is no real tax-rate reduction. All it would do is reduce the rate of tax increases now taking place through "bracket creep" as productivity expands and people move into higher tax brackets.
The tax cut was defined by pollsters so Bush could go around during the campaign and the State of the Union exhibiting cosmetic families of politically correct configuration who would receive significant direct payoffs—"giving the people's money back"—which completely misrepresents the purpose and character of tax-rate reductions.
TAS: Which is...?
GILDER: To expand the whole economy, to make everybody richer, to increase the number of jobs, to accelerate the pace of innovation, to open opportunities, to remove limits on the horizons of aspiration across the population. It has nothing to do with taking money from spending programs and awarding it to worthy families.
Bush tried to embarrass Democrats by saying things like "$1,600 in tax savings may not mean a lot to Washington fat cats but it is very real money to Mr. and Mrs. Gomez." But the Democrats are right. Those givebacks are utterly trivial compared to the vast expansion of the economy enriching millions and millions of people that tax-rate reductions can accomplish, and which hold far more promise for the Gomezes than $1,600. The Gomezes would be better off if the tax cut were more "skewed to the rich," if we had immediate substantial reductions in the top rate, which now approaches 50 percent in some states, and in capital gains, both of which have a much more powerful effect on economic growth, plus increasing revenues. As Reagan showed, the one way to get more tax revenue out of the rich long term is to cut their tax rates.
But Bush can't do that. Polled politicians are incapable of leading, they're in the back of the herd getting pushed around by anybody with horns.
TAS: Is Bush getting pushed around?
GILDER: He's being carefully hearded into the spending-cut corral which, for Republicans, leads to the slaughterhouse.
TAS: He's not cutting spending enough?
GILDER: He's cutting it too much. Because he wouldn't make the argument that tax cuts will boost growth and increase revenues, because his advisers did not design the tax cut primarily for growth, he now has to appear at least to pay for the tax cuts by restraining spending. He thus falls victim to the classic Democratic strategy, which is always to stop tax cuts by focusing the issue on spending cuts. And if the issue is spending cuts, the Democrats always win. They frame the issue as "no tax cuts without spending cuts," then they prevent any spending cuts and then use that as an excuse to forestall or reduce tax cuts. In Bush's case they already have done this. But even without the compromises the Democrats forced on him, Bush's tax cut was neutered in advance in a vain attempt to sell it as a package of goodies and givebacks.
TAS: What does this have to do with polls?
GILDER: Polls routinely show that the public wants to cut back excess government spending, balance the budget, and so forth. It's very deceptive. These polls are worse than meaningless—politically they are a trap.
TAS: Why is that?
GILDER: Because regardless of the popularity of spending restraint in general the particular beneficiaries of spending will fight to the last ditch to retain their jobs. As a matter of fact, the more useless and unproductive the spending, the harder it is to cut.
You can cut defense spending, which actually imparts new capabilities and reduces the likelihood of war. But try to cut subsidies for performance artists. People who have nothing else they can do except go on the stage and smear themselves with excrement will fight to the last ditch to retain their subsidies. They have no choice. Even in a country as rich as this there is remarkably little support in the private sector for excrement smearing. And the support that is available is mostly illegal!
So the Washington Post and New York Times will solemnly agree that this is a First Amendment issue and there will be a tremendous uproar. Advocates of spending cuts will be, as David Stockman was in the 1980s, portrayed on the cover of Business Week as butchers, even when they were hardly cutting spending at all. Gingrich was destroyed by his very tentative efforts to trim spending. If Bush fights for spending cuts he will destroy his presidency for nothing because the only spending cuts that will reliably happen are in defense.
On existing worthless government programs Republicans should accomodate Democrats. What they should not do is start new spending programs, thus creating new constituencies that have to be appeased, which of course is exactly what Bush is doing in education.
TAS: How can Republicans cut taxes if they go on spending binges?
GILDER: Because tax cuts always increase revenues, not just government revenues—although they do that in fairly short order—but revenues across the whole economy and thus the value of assets across the economy.
TAS: Under Reagan federal revenues rose about 30 percent.
GILDER: Right, but that was the smallest, least important effect. Far more important, Reagan's tax cuts increased the value of the assets of the American economy by threefold. So while government debt increased under Reagan, total national assets increased by several trillion more.
The proper measure for the relative size of the national debt is not GDP, it's the overall value of the assets that are ultimately the "collateral" for the debt, the total national wealth of the United States. All the real estate, the equities, the bonds, all the various assets of the economy, which increased in value massively during the Reagan administration largely as a result of the tax-rate reductions.
TAS: So when we measure debt against GDP, it's apples and oranges—national debt against national income, rather than national assets?
GILDER: Right. There's a myth about the Reagan administration that is being wielded against the Bush administration: that Reagan cut tax rates in order to starve the government. This myth was actually propounded by Pat Moynihan...
TAS: And Dave Stockman.
GILDER: And Dave Stockman, completely misrepresenting what actually happened.
The Reagan administration cut tax rates, and as a result they were able to increase government spending massively and win the Cold War. And Reagan became a popular president while decisively reducing debt in proportion to the assets of our national economy.
TAS: But balancing budgets and paying down the national debt—in absolute terms—has become a hallowed goal of American politics.
GILDER: It's almost always a disaster. Look at the Carter administration, acknowledged even by most Democrats to be an economic failure with double-digit inflation and interest rates, soaring unemployment. Nonetheless, toward the end they had a balanced budget, inclusive of state and local surpluses, and even a trade surplus, exactly the Nirvana current economists are pursuing.
TAS: Yes, I remember the '70s. Life was perfect in every way.
GILDER: For the government. The real economy was on the verge of collapse. The government was in the black, but the whole private sector was deep in the red. After the Reagan years there was a large nominal debt in the public sector, but the private sector was flourishing and was dominating the world economy. |
