May 29, 1998
Pacific Research Institute and the Smith Center's 7th Annual Speaker of
National Prominence Dinner Featuring Hon. Dick Armey, House Majority Leader
Introduction by
PROFESSOR CHARLES BAIRD, DIRECTOR, SMITH CENTER, CAL STATE HAYWARD:
We are about to start the program for the evening. My name is Chuck Baird and I am the Director of the Smith Center for Private Enterprise Studies at California State University Hayward. As Sally said earlier, this is the Smith Center's seventh Annual Speaker of National Prominence Dinner. Sally and PRI have been our partners for the last three consecutive years and we hope that we will continue to be partners for many years to come.
Before I introduce our speaker, I would like to give special recognition to some people. First, Owen and Erma Smith, whose generous gifts to the College of Business and Economics at Cal State Hayward created and sustained the Smith Center. Owen and Erma. Next I would like to introduce the President of California State University, Norma Rees. President Rees's support of the Smith Center has been indispensable. Next I would like to introduce the Dean of the College of Business and Economics, Jay Tontz. Now it was Jay who appointed me as Director and from time to time I have relied on his counsel to save me from what Alan Greenspan would call episodes of irrational exuberance. Thank you, Jay. Next I would like to introduce a candidate for the office of Mayor of Oakland, Shannon Reeves.
Now it is my great privilege to introduce the speaker of the evening. House Majority Leader Dick Armey represents the 26th Congressional District of Texas. Unlike most of his colleagues in Congress, he is also a free-market economist who received his Ph.D. from the University of Oklahoma. In economics he is a student of Adam Smith, Milton Friedman, and F. A. Hayek.
The first of Armey's axioms at his Web site is: "The market is rational and the government is dumb." While Hayek never stated his principle of the division of knowledge quite that way, Armey's axiom clearly captures the essence of the idea. Representative Armey was Professor Armey for 13 years at the University of North Texas, but then, in 1977, he became department chairman. That gave him pause. He began to wonder whether his future lay in academia or perhaps elsewhere. Fortunately for the rest of us, he gave up campus politics for Washington politics.
He was first elected to the House of Representatives in 1984. Among many legislative accomplishments he has successfully championed legislation to reform public housing, he crafted the unique legislation which permitted the closure of obsolete military bases, saving taxpayers at least $4 billion a year, and he was a principal proponent of the 1996 Freedom to Farm legislation, which will save taxpayers billions more.
In 1993, when Democrats controlled the 103rd Congress, Armey submitted a major bill, HR1341, to amend the National Labor Relations Act. He called it the Voluntary Bargaining Act. It would have eliminated all forms of compulsory unionism in America's private sector labor relations. The bill didn't succeed because President Clinton, congressional Democrats and far too many wet Republicans, all beholden to unions for campaign contributions from forced dues, opposed it. Next Tuesday California voters will take a giant step towards making it easier for such legislation to pass in Congress and in state legislatures by voting yes on Proposition 226.
Dick Armey is a principled conservative. He says you can compromise on details, you can compromise on strategies, but you must never compromise on principles. When President Clinton is right, as he is on NAFTA, Dick Armey supports him. When the President is wrong, which he is on most other things, Dick Armey opposes him. In the summer of 1990, when President Bush cracked his lips over no new taxes, Armey authored a Republican conference resolution which opposed "new taxes and all tax rate increases as a means of reducing federal budget deficits." Notwithstanding President Bush's opposition, the resolution was adopted by a ratio of three to one, and the 1992 election proved that Armey was right and Bush was wrong. In December of 1992 his colleagues elected Armey, House Republican Conference Chairman and in 19" he was the main author of the Contract With America, which resulted in a Republican majority in both houses of Congress for the first time in forty years. Armey was elected Majority Leader in the 104th Congress and has held that post ever since.
As Majority Leader, he continues to be the principal congressional proponent of scrapping the existing Internal Revenue Code and replacing it with a simple equitable flat tax. When Republicans took over Congress in 1994 Dick Armey said, "The American people didn't give us power; they gave us responsibility." Among the Republican House leadership Dick Armey is unique in steadfastly trying to live up to that responsibility. Unlike many others, Dick Armey is not reluctant to confront President Clinton's formidable political skills and his legions of apologists. A few weeks ago, in that Texas classroom, he spoke the truth about the moral responsibilities of elected officials. He believes character, values, and behavior ought to matter. Imagine that.
Recently the Majority Leader has directed more of his attention to what he calls a values agenda. He has written a very thoughtful essay with the title "Recovering Our Moral Emphasis." In that vein he will address us this evening on the subject "Freedom and Responsibility: the Role Values Play In Shaping Public Policy." Please join me in welcoming Majority Leader Dick Armey to our 7th Annual Speaker of National Prominence podium.
Well, thank you all for that. I believe if we were to hold this election in this room tonight, we'd both win, wouldn't we? And we'd pass the laugh test. I want to thank you all for letting me be here and I want to extend a special vote of appreciation to Owen and Erma Smith. You see, I firmly believe that in the end, when all the personalities have come and gone, ideas prevail, and that in fact in the end we are governed by ideas. And that's why I'm always encouraged when I find people who commit their resources and their support to institutions that are in themselves committed to ideas. And I want to thank you, Owen and Erma Smith, for that kind of a commitment. And while I'm at it, I want to, if I may, I want to thank President Rees.
How many times have we seen universities so graciously accept a gift for a stated intended purpose and then use the resources that are derivative of that gift for purposes totally contrary. And for your university to maintain the integrity of the purpose that you received from the Smiths, I think is a remarkable accomplishment and one for which you should applaud. I've seen too many times a failure to do that. Also, if I may, thank you for allowing me to be with the Pacific Research Institute. It's an organization that I have relied on for resources in my own work for some time, as well indeed my young staff, who travels with me on this trip. I pulled out a book that he was reading and intrigued over with respect to a private-market approach to environmentalism, and it is a product of this very institute. So your work shows up on the most opportune occasions. That's a true fact story.
You know, I am a politician, I am from Washington, but most of what I tell you will be true. Even after 14 years in Congress, there are some old habits that are still hard to break. Now, I don't fit in very well in Washington, by the way, and I doubt that I ever will.
I am a free market economist by training. I believe in freedom. My highest value in public policy is on individual freedom and liberty. My slogan is freedom works, and I agree with my friend, Steve Pejovich who makes the point and it's such a well-put point that I'm tempted to steal it, but he said it so clearly.
The free market punishes immorality. This is something we need to understand. Those of us who believe in free markets and freedom are accused of having faith in the market and, you know, quite frankly, it is a matter of faith, because a market is a system within which you have voluntary transactions by intelligent and rational people, each acting on their own behalf and trading away that which they value less for that which they value more. And I dare say that none of us will voluntarily make a transaction in which we perceive ourselves to be the loser.
Therefore, the notion of market exploitation is by its very definition fraud because for there to be an exploitation, there must be some ability to compel somebody to do what they would not otherwise do voluntarily, and that is not what is done in markets.
Governments, by the way, on the other hand, exist expressly for the purpose of making people do what it is they would not do voluntarily, and many times, most of the time, we would hope all of the time, this is a good thing. For example, it is appropriate for me to be compelled by the government to not bring bodily harm to someone or someone's property, to respect their property rights, and to respect an honor the contracts I make.
There are many ways in which the compelling forces of government can be very useful and necessary in this society. But I would suggest to you that government exploitation is a notion that could have a great deal more currency than could ever be attached to market exploitation. And I happen to believe that there's a good reason for us to have faith and confidence in the market. It will provide and if there's a problem, the market will find it out. And just as we are so fond of saying "the truth will win out," I will say "the market will win out" which is another iteration of exactly the same point.
Since the market is an instrument where free and rational people make voluntary transactions with one another, what we're really saying when we say we have faith in the market is we have faith in the people. But the Galbraithians argue, people can't be trusted to know what's in their own best interest. You know, Galbraith made quite a splash in 1958 with The Affluent Society. It was all inspired by Veblin's Theory of the Leisure Class. Unfortunately, he was not inspired to put any footnotes or citations. And, of course, you're all familiar with the great review of the Theory of the Leisure Class by H. L. Mencken who knew B.S. when he saw it. B.S. is a Texas term.
And Veblin, with his tongue firmly planted in his cheek wrote a review which was entitled The Theory of the Theory Class, because of course it's all nonsense and presumptiveness. But for me to have faith in people is really in the end to have faith in the Lord God Almighty, for it is He who made us and made us in His own image.
I think it was Plato or maybe Aristotle that warned us against the sophists and if you know who it was, you might fear that you are one. Nevertheless, we were warned some place and the sophists, of course, will scorn us for this faith in the market. They are missing the best part of reality because what in fact is the greater source of our happiness, comfort, and success in life is the market, the freedom, the transactions we can make.
Now, getting back to my friend Steve Pejovich, he says something that I think is rather remarkable: "The market punishes immorality."
If in fact in the market you have free and rational people who make voluntary transactions where nobody will make a transaction in which they perceive themselves to be a loser and everybody trades away that which they value less for that which they value more, who would, within such a context, voluntarily do business with somebody who lies, steals, or cheats? So if in fact you are not moral in your conduct of interpersonal relationships, you will find, as the saying goes, that there's just no demand for you, baby, because nobody will want to do business with you if you are immoral or incompetent.
What the market does, quite frankly, in this wonderf ully fascinating process that we call the allocation of scarce resources, which we put in such erudite language that no student can possibly understand it, thus ensuring our tenure which, incidentally, means not having enough money forever, is allocate resources to their most preferred use in the economy. And the exciting thing about that is the market cannot allocate resources in a world of scarcity which again is also denied by Galbraith, who really knows better because he was trained as an agricultural economist. It allocates resources to the highest use. As you allocate resources in a scarce society, you must by definition allocate them away from another use. And resources are allocated away from the incompetent or the immoral to the competent and the moral, because in a market you can never be a success in your own life unless you are in fact a success in somebody else's life. And if you fail, you run into that old problem again: there ain't no demand for you, baby. So the market is a wonderful device, a very easy device in which to have confidence. And the long and the short of that is, freedom works.
I also noticed a few other things along the way. Nobody tends to somebody else's business as effectively as they tend to their own. Wouldn't you agree with that? Why else would we spend so much time telling people to "mind your own business."
The fundamentals of all human progress is what? The division of labor. Along what lines? Along the lines of comparative advantage, that is, we will naturally find for ourselves engaged in that activity at which we are least worst. And we will be assigned to that activity, and therefore, no matter how incompetent we are, there's a use for something. Godlike, the market throws nobody away. There's something for everybody to do to make a contribution. And in fact, this old concept called human progress, that's always fundamentally just another refinement of the division of labor, works best when what? When people mind their own business. But there's a problem. It's called government.
Governments exist for what purpose? To mind other people's business and since you can never know somebody else's business as well as you could possibly know your own, there's no way that you could ever be as effective in minding somebody else's business as you could be if you minded your own. Hence, Armey's axiom number one: the market's rational; the government's dumb. The government, by simple definition, simply doesn't know what it's doing and, for the most part, doesn't know why it's doing it and, therefore, has no course of action except to redouble its efforts in the face of every failure.
What we really need in America is not so much a reform of public policy I mean, I think reforming the tax code is an important thing. I'm committed to it and I'll do it. I think maybe some day we ought to reform and we will reform retirement security in America so that it is in fact secure and it is personal and not social and, therefore, capable of being secure.
I think we'll reform the tort laws and we'll reform the bankruptcy laws and we'll reform the insurance laws and we'll give Americans a chance to voluntarily opt out of the great lottery game that goes on in so many ways, and these are good things to do. But I think before we do that we need to get back to the question of what must we do. And what we must do is to bring government and government policy to heel back into a reconciliation with the fundamental truths about freedom and liberty.
You see, liberty is not something that governments can give people. Liberty is given to people by God Almighty. It is the job and the requirement of governments to honor that gift and to protect that gift. Our founding fathers knew this. They understood that. They laid the road map out for us on these things. But we've forgotten them. And they also understood in those days that freedom wasn't free, that the price of freedom was eternal vigilance and that that vigilance had to be exercised every day in the form of personal responsibility, accountability, honesty, dignity, respect, and a lot of what today have been old-fashioned notions in America.
The other thing that our founding fathers did that made this American experience such an incredibly unique thing in terms of a nation was this bold contention that no one could have an authority in this governmental process unless they accepted a just authority granted to them only by the governed. Isn't that remarkable? And that's why I will tell you it's not about power; it's about responsibility. You didn't give me power.
You didn't say, "Dick Armey, go to Washington and govern me." You said, "We believe you're a person of some responsibility, some integrity, some understanding of who we are, and some trustworthiness, so go to Washington and represent me and do so in a responsible fashion." But what we have in Washington is people that don't know us and because they don't know us, they've lost sight of what is the purpose. And I'm going to argue that that is the crux of the matter.
How many times have you seen people come to you and in one form or another give you the message that you can be free from responsibility if you'll just trust me, I'm from the government. Just leave it to me and I'll take care of it, right? I'm from the government and I'm here to help you. If you'll just elect me and put me in power, I'll make it possible for you to fulfill your American dream. You ought to be insulted right there at that spot. Where did you get the audacity that I couldn't do it without you?
You know, we support the government; it doesn't support us. People forget that in Washington. They call those people Keynesians, by the way. My favorite iteration of this audacity that comes from the people who have been framing public policy throughout my lifetime my daddy knew them as "New Dealers;" I knew them as "Great Societiers," it was, of course, everybody knows.
When a liberal, by the way, says "of course everybody knows," that means he wants to make an assertion that's so bold and audacious that nobody will debate it because he could never survive the debate. " Of course everybody knows that the great American dream is owning your own home." How many times have you heard that? Well, I can tell you, ladies and gentlemen, that that is not true. The great American dream, ladies and gentlemen, is not to own your own home. The great American dream is to get your kids out of it.
If you think about it, if you look in your life and at all the things you've done and we've got some very important people here that have done some very impressive things but if you really look at it, what has been the most important thing that you have done in your life? What has been the most awesome responsibility you've had in your life? What has been the thing, for fear of failure, the most frightening in your life? What has been the thing that you have worked the hardest at, felt most insecure about and prayed the most about? Raising those little children. Is that not right?
And the consequences that you felt if you didn't do it right. We know from the Bible that the Lord shared a lot of these reservations, hopes, fears, and concerns. He looked down from heaven, saw the children of Abraham wandering around into one bit of trouble after the other must have frustrated him half to death, right? and do you remember what he said? And this is very important because mom and dad, this is what we said a hundred times. He said, "I hope my children will know and obey my laws so things will go well for them." He didn't say "so they'll know I'm the boss here." It wasn't about power, was it? It was about giving the children freedom, we respect their right to that freedom and we hope that they will exercise that freedom in a responsible fashion so things will go well for them. Is that not exactly what you've done with your children?
Didn't you worry and concern yourself? Did you teach your children about honor, duty, integrity, respect? Did you teach them that the truth mattered? Did you teach them it was wrong to tell a lie? Did you teach them about patriotism? Did you not teach them all of these things about citizenship, about love and affection, and sharing and caring? Did you not do that because you knew that if these children did not know these laws, these rules, these principles, and practice them in their own lives that things would not go well for them?
Did you not tell your children if you don't learn how to be fair and caring, the other kids won't play with you, and in a world of voluntary transactions, you will be rejected if you're immoral or unkind, that if your youngsters had wanted to be free and wanted to be happy, have happiness in their success, in their freedom, did they not have to know some very fundamental and imperative conditions of character and practice them in their lives or the children's lives would be a failure in their own life and in the lives of others?
How many times did you hold that very, very precious baby close to you, whether they were eight months or eighteen months or twenty-eight years old? You hold them so close, you turn your eyes to heaven, you make that same prayer we've made so many times, "Oh, Lord, will this child ever amount to anything?" for fear that they may not learn these things that they must know and practice in their lives if things were to go well with them.
Now how can we have a great debate across this nation today in light of our own experience with our own fears and hopes and dreams and prayers and disciplines in the most important thing we did today? How can America sit here today and look on with casual interest over a bunch of talking heads in Washington asking the question does character matter?
What else can matter? How can you have freedom and dignity and success if you don't have it rooted in character? And I'm telling you, the market would destroy the people with a lack of character. The government harbors people with a lack of character because the market is dumb about these things that are the most important of all.
Now let me get back to the story of that most important business of your lifetime. If in fact your child was supposed to be a great success and you hoped him to be, that she would be a good mother and a good community member, a good citizen and a good friend and a good spouse, obviously that you worried about that child having an education, did you not feel very strongly that this was your child, that you were their best, most dedicated teacher, and that you should have dominion over that child's education and the school should be accountable to you?
Did you not in a hundred different ways, whether it would be where you took your job, where you moved, into what neighborhood, what house you bought in what community, did you not exercise school choice so that your child would be made safe in school? And is your child any more precious than a child of a poor person that's stuck in an inner-city situation? And shouldn't that child's parents have the same rights of dominion and care and love and nurture and choice over that child's education as your child? Can we be a nation that is so callous that we treasure this right and this freedom and this opportunity for us and practice it and then turn a blind eye to it in the inner-cities?
School choice is not about the schools; it's about the children. Schools have no reason to be, if not for the children. If the schools were an end in themselves, we'd walk away and leave them. But we stay in there and we fight for the schools because we're fighting for the children. This is not some kind of notion that's designed to harm the public schools. What we're trying to say to the public schools is be accountable to the parents, be competitive, understand that you can lose your monopoly control of the children if you don't serve the children, and the public schools will benefit.
This is not about making the private schools better. They're obviously better; that's why people are leaving the public schools for them. It's about making the public schools better. This public policy debate that we're having today must be seen in light of something that is bigger and better and more important than any moment and anybody. And we can go on with that, but certainly the education of our children must be a compliment to and a reinforcement of the things you work so hard to teach them.
So if your youngster grows up is successfull, prepared, and able, you have two great events that you can look forward to. The first usually is that wonderful moment in every parent's life I've had it five times where that precious baby comes rushing through the door and they say, "Mom, dad, I got the job." You turn your eyes to heaven and you say, "Thank you, Lord. They're going to leave." And that other wonderful thing is when again, you've given them this advice: "Your job, young man, your job, young lady, is to get married and to settle down."
Do you know a parent alive in America today that hasn't said to their young daughter or their young son, "Get married and settle down. I've got four sons. I'm looking for a woman to take each of them off my hands." And yet we've got a tax code today that says to these same children, "If you do get married, we're going to punish you under the tax code." Now that's silly.
We've got a law on the books that gives our children a message totally opposite to our best hope and dream for them. And again, the market would encourage the children in the right way. If in fact you didn't have this aberration in the tax law what would the youngsters be hearing and believing? We heard it years and years ago: two can live cheaper than one, right? But in the normal course of things that's what you would find and there would be the normal encouragement to "let's get married and settle down, honey." Now it's, "I can't afford to marry you. You're a tax liability to me." This is a very unromantic way to spend an evening.
Talking about the tax code. Should we have a law that forces children to be talking about the tax code instead of their hopes and dreams for their own life? So they get married and they settle down finally, and the wonderful thing about the market and I love the market, the market is so strong and so powerful because it is so consistent with the best of human motives and human purposes in life, that it overcomes irrational public policy. Despite all the perversions of public policy, the mass market still prevails. So now all of a sudden you have that wonderful day when that next best thing comes, that they do get married and settle down, and then, of course, the wonderful thing is the grandchildren come along. How many of you know what I'm talking about?
Now again we've got all these wise guys in Washington that think that they ought to enjoy an engineering of your life and they put together a retirement system in the thirties which, if it were done in the private sector, they would be prosecuted by the government for all that unfunded liability. You think that they could ever survive what is it, ERISA? You think if they'd subject the government to the same rules they subject us to, they could stand up? Wouldn't it be called something like a pyramid scheme? Seven and a half trillion dollars worth of unfunded liability and a three and a half trillion dollar debt to the thing that they, in all of their audacity, call a trust fund, as in "I'm from the government; trust me." Isn't that amazing?
So grandma and grandpa, struggling with all this social insecurity, turning around now that they have been compelled by the law to spend a lifetime of working and paying into this system that is bankrupt by any definition under the sun, they get their grandchildren. And the grandchildren are wonderful. The grandchildren are walking around mine aren't my children are walking around wearing little label buttons saying: "Who the devil is FICA and why's he taking my money?" And the liberals are saying, "You know, if we don't just save this system exactly as we have it, we're going to have intergenerational warfare. Remember what I said before? When it is very clear they don't know what they're doing, they only have as a course of action to redouble their efforts. This is what the psychologist defines as crazy. Crazy is doing more of the same thing and expecting a different result. But the kids, bless their hearts, the kids are wonderful.
You listen to the youngsters today I'm talking about the 19-20 year olds and I'll tell you something. I travel across this country, I talk to a lot of young people, and there are more 20 and 30 year olds today that are worried about their retirement security in America than there are 60 and 70 year olds, and they're feeling the burden of this system that's coming crashing down around their ears. And yet the youngsters will say, "You know, I know it's killing me but it's what supports grandma and grandpa's retirement." And bless their little loving hearts, the youngsters will abide this, they'll accept it. For grandma and grandpa they'll accept it. We've got a bunch of liberals up there talking about intergenerational warfare and the kids are seeing 15% tax "taking away the first 15% of every dime I own is something I'll suffer because it's taking care of grandma and grandpa."
And grandma and grandpa are saying, "Look, if you just leave me alone, don't mess with my poor little pittance that I've got after all this life's work, let's get together and find something for the kids," and grandma and grandpa are loving the kids.
Now you all know what I'm talking about. I can tell you there is no greater love that I know of on this earth than the love between grandparents and grandchildren.
Am I right? And if you listen to the kids they'll say, "Alright, I'll bear these taxes for grandma and grandpa," but they tell me mine say, "But not you, dad. It's you boomers that are gypping us." I cleaned it up a little.
And so the kids are saying, "Don't be my common enemy. Do something. Take a public policy that understands our goodness, our ability, our creative talents and our skills and our ability to care for ourselves individually, separately and responsibly in a world of free market transactions. Let us have our own savings to control them for ourselves and we will secure our retirement and take the burden of that worry off your shoulders." And that's what the youngsters are saying and they have a faith, ladies and gentlemen, that is not shared by people in high office. And that's a morality that is exhibited by these children.
So what I'm suggesting to you then is while we tend to be very obsessive about the moment in American politics and American public policy, we'll never understand what our responsibilities are in a free society unless we get beyond ourselves and get beyond the moment, develop for us a context that understands that freedom is the most precious gift of all from our Lord God Almighty, that we have a nation that was founded on the principle that it is the responsibility of this government to protect and nurture those freedoms, and that people pledge their lives, their honor and their fortunes to give us that nation, and that we should have sufficient faith in our fathers to honor that commitment to freedom, dignity, personal responsibility, integrity, and all of those old-fashioned values and see that for our future, the future of our children.
My final point, and in California I can do this. This thought is inspired by John Wayne. John Wayne in the movie The Shootist, you may recall, was talking to Opi and he said to Opi, "I won't be wronged, I won't be lied to, I won't be laid a hand on." And then more importantly he said, "I do this for others and I require the same for myself."
And what he said there is if you want to be treated with respect and dignity, if you want somebody to understand your abilities and respect your right to be your own person on your own terms, if you want to be left alone, if you want to turn your eyes to Washington or turn your eyes to the state capitol or turn your eyes to the mayor's office and say, "Mind your own business," you must first be willing to do that for others. You have no moral authority in America, Mr. and Mrs. America, no moral authority in a world of freedom and dignity and responsibility, there's no moral authority by which you can come claim these rights and freedoms for yourself unless you first respect them in others.
And yes, in the end, that's what character is all about, and yes, in the end, character matters, ladies and gentlemen, and without that character, without a nation of that character, there can be no free nation. And so today, as we turn on our news and we see all these wonderfully well educated people with all of their intellectual affectations and airs about them, having this wonderful debate: does character matter, why don't we all just give them the same answer: in the end, nothing matters without it.
You cannot have freedom without morality, you cannot have freedom without integrity, you cannot have freedom without personal responsibility, and you cannot have freedom without a respect for other people. If you don't first do that for others, you will never have a world in which you can expect it for yourself. Thank you.
Questions Answers
Q: Why is it that the public does not seem to care about the character and behavior of President Clinton?
A: Of course, that's what I'm concerned about. I don't know the answer to that. I was out on the campaign trail in 1996. President Clinton was up for re-election. Wherever I went during that campaign season I made this point: that the election of 1996 was not an election about President Clinton's character. It was an election about the character of the American people. And I am not distressed about the President.
I have to tell you, ladies and gentlemen, first of all, I am a person of faith and it is very important to me in my own life. I am and the President is a speck of dust in time and space and importance. The President will come and the President will go. The presidency should endure and the nation must endure and no nation that can be as complacent about such issues of character and responsibility, honesty and integrity as this nation seems to be will endure. So whatever is the answer to the question: why is it we seem complacent, I don't know, but I can tell you what the imperative of that question raises. We had better get over it or we will certainly perish as a nation, and that's a responsibility each and every one of us separately, individually carries.
Q: Two questions that are similar. Pacific Research Institute has been in the forefront of the battle to eliminate race and gender based preference programs. Why is the Republican caucus reluctant to pass the Canady Bill that would put an end to these issues? And the second related question is given the passage of the California Civil Rights Act, why can't House Republicans end federal discrimination programs?
A: Let me see, Armey's axiom is you never put a good idea in harm's way. I feel very strong about that. The Canady Bill is right and bless his heart, Tom Campbell is a real champion for that bill, as am I. But I have to tell you if we put that on the floor for a vote today it would lose and it would lose big and no less than 40% of the Republicans in the House of Representatives would not only vote no but would disavow the effort. I will not let Canady put that idea on the floor for that kind of mistreatment, neglect, and abuse by my own party. I mean, I understand the liberals; they'll do that.
The idea has been too hard fought for, it's too important an issue for us to be careless in the treatment of the idea. And so we must continue to work. And I've talked to Charles Canady about this and I've talked to others. This is an idea where you have got to talk to the American people and get the American people to understand. I have two points, two pieces of law where we're basically saying the same thing, we're posing the same question to the American people in two pieces of legislation: the Canady bill or the flat tax. What we're asking the American people is are you, Mr. and Mrs. America, ready now to make a declaration of an American definition of fairness, as fairness is when everybody is treated exactly the same as everybody else. And I don't believe we ought to throw either one of those two opportunities for that vote out to the floor until the American people have made that declaration in such resounding terms to the members of Congress that even the most nervous Nellie in Congress will find himself afraid to vote no and go home, as opposed to being afraid to vote yes and staying in Washington.
Q: If character matters, why does the Republican Party allow Congressmen in government to establish organizations such as Mainstream Republicans for Promoting Abortion?
A: Bob Novack asked me about this in 1995. We've got all these Republicans that are going off in different directions and so on and so forth. And I said, "Bob, in 1994 I turned my eyes to heaven and I said, 'Lord, please send me more Republicans.' And bless his heart, he did." Republicans are very independent minded people. We don't march to some, you know, party line drummer. We are our own people on our own terms and we believe that's the right way for it to be. I cannot tell you how deeply heartfelt is what I believe to be a moral conviction regarding protecting the lives of those precious unborn babies, and I make every effort to do so. But I have people who share a membership in the Republican Party that don't agree with me on that. I regret that. I regret that for them more than I regret that in them. That's how deep my conviction is. But I have no right to tell them they can or cannot have that conviction. If I were to presume that I had the right to tell them what conviction they could have, I wouldn't be in the Republican Party. I would join the Democrat Party. That's what they do in that party. They don't do that in my party.
Q: If a flat tax becomes a reality, would there be a super majority needed to raise the tax? Would there be less taxes collected, more taxes collected or the same amount of taxes?
A: First of all, it is written into the flat tax that once it is implemented into law, and I will implement it into law, ladies and gentlemen just mark your calendar on this. No later than the year 2002, the flat tax will be signed into law as I have written it, by President George W. Bush. That's my prediction. Now it will require the two-thirds majority to either raise the rate, lower the family exemption, add a second rate or restore any complexity to the bill. We have written a flat tax so that it has that rate which gets you $30 billion short of revenue neutral. People say, "Well, why don't you make it revenue neutral?" Because I think the government's too big and spends too much of our money. I would like to have us come up $30 billion short and go find thirty billion.
Q: I was going to ask the question about George W. Bush but I guess that's already been answered. What are the prospects for the payroll protection legislation succeeding in Congress?
A: First of all, thank you, California, for what you're doing on this and please, you know, you've got a few days left. Hold this effort together. This is a decision of the Supreme Court of the United States called the Beck decision that says an individual has a right to hold jurisdiction over the extent to which any part of his or her pay check will be used for political purposes, and that a union cannot lawfully compel dues that are used for these political purposes without the prior consent of the person who in fact earned the money in the first place. This seems to me pretty simple stuff.
Now, President Bush, bless his heart, never implemented an executive order requiring the Department of Organized Labor Department of Labor to enforce that law until after he had lost the election, which is why my children will never go to Yale if they learn that kind of thing. A perverse notion of fair play, it's beyond my ken. It seems to me the logical thing would have been to sign an executive order enforcing that decision right after he won the first election, thus giving the taxpayer, working union member in America three years to acquire some jurisdiction over his or her own money prior to the next election. But George Bush, being a fair-minded man, said let's throw the game. I'm very resentful of that because as soon as Clinton came into office, he signed an executive order that remanded that. And so you had no enforcement of constitutional law in the United States and we have to fight it out here.
Now, what you have in Congress, and I have to be very careful because I love, admire, and respect my colleagues in the House of Representatives, and I am in fact privileged to get to serve with them, but many of them are politicians by trade. And a politician is a person who stands with feet aflay and shaky knees on shifting sands with his finger in the wind saying, "I'm standing on principle here, and the principle is I will cast no vote that offends organized labor," upon which many of them stand.
So once again, the right thing to do cannot command the votes because the right thing to do would take away from organized resources organized labor, the resources by which they compel the vote that causes them to continue to do what is not only, in my estimation, an unlawful but an immoral thing with other people's money. And that, ladies and gentlemen, is called politics and that, ladies and gentlemen, again is something that we would never see happen in a world of voluntary transactions and why once again I will tell you, Armey's axiom number one, the market's rational, the government's dumb, because it is the government that gives organized labor the power to compel people to pay into these political funds that which they would never pay in voluntarily.
All monopoly power, according to Milton Friedman, comes from the government. The market will not produce monopoly power, but the government works on behalf of those contingencies constituencies that either supports the majority or intimidates the majority, and in this case, organized labor intimidates enough of the majority to get a majority with the minority.
Q: Why not a national consumption tax instead of a flat tax? That's what our founding fathers wrote into the Constitution. And second, what can we do about the thirteen Chinese missiles pointing at our major cities?
A: Let me first dispense with the national sales tax. Adam Smith, of course, gave us the famous axiom of taxation in "The Wealth of Nations," written in 1776, which is the Old Testament of my discipline, Alfred Marshall, by the way, having written the New Testament. And one of my favorite axioms of taxation is that the government has an obligation to strip the down off the goose with the least amount of squawks, and of course this Tax Code now carries with it about $200 billion worth of squawks called compliance squawks. A national sales tax is a wonderful thing.
It's a perfect example of one of those things that will work in theory but never in practice, and has never worked in practice. Twenty-two foreign nations have tried a national sales tax and all twenty-two of those nations have both a national value-added tax for their failure to be able to enforce a national sales tax because of the growth of the underground economy, and a national income tax.
We don't want both, and there's no tax that's more insidious than a value added tax because it is totally hidden from the person who pays the tax and therefore is able to increase even under Margaret Thatcher in Great Britain. So when you really get down to it, if you accept the proposition that every civilization, every culture, every nation must have some government in some modicum and of course the debate is how much, that that government must fund itself. It funds itself by levying taxes. You should levy those taxes under the system by which you make the minimal imposition on the rights of the people who pay the tax, and that's what I think the flat tax does.
Now the Chinese missiles. Again, let me remind you. If this nation had the foresight that Ronald Reagan had and the fortitude we would have in place today a technology that would make those Chinese missiles obsolete. A policy by which you address the existence in the world of the most horrible weapons mankind can imagine by mutual assured destruction which is fundamentally immoral, but achieves a level of immorality that is beyond belief when if this policy persists in the face of a relatively inexpensive technology that could make that kind of weapon system obsolete. And I have to tell you, if we see anything from the Chinese missile crisis, it's that we ought to be vigilant about defending this great nation with all the best technology we have and we need to get on with the task.
You can't stop the Chinese now from having the missiles, you can't stop them from targeting the missiles, so now you had better find a way to deal with them. And I for one am not going to deal with it by betting on a sense of goodwill on the part of the Chinese. I'm not even sure we can answer it in the old context of mutual assured destruction right now. So we've bought for ourselves a devil of a pickle and we'd better find our way out of it. I think missile technology, or anti-missile technology's the answer.
Q: And the last question is you say freedom works. Does freedom work in the case of Microsoft? Most conservatives, including Newt Gingrich, don't think so. So doyou think the government's actions against Microsoft are justified or will they have hurt high tech more than help it?
A: I think the sweetest irony of all is that all the memos, all the files, all the data that will be compiled, sorted, catalogued and some day retrieved will be done by the anti-trust division of the Justice Department on Microsoft's Windows. Isn't that right? May I have a moment of sort of reflective self-indulgence here? When I was a professor you're going to find this hard to believe, but it's a true fact story, and again, like I say, most of what I say is true, mostly.
I was a very popular professor, and one of the reasons I was popular with the students is I had a lecture that they called the "Fruit Loop" lecture. And the Fruit Loop lecture, you may recall or you don't recall, was about the anti-trust division of the Justice Department's case that they conjured up against the American cereal industry, because they saw the brand proliferation that was going on in the cereal industry as something called "shared monopoly." They never could quite contrive in their mind and understanding of the fact that once when somebody I think it was Quaker Oats discovered that there was kind of a faddy thing in the sixties for healthy cereals, that we had a proliferation of healthy cereals. And that when somebody decided that one of the ways you keep the kids shut up was to give them candy-coated cereal and sit them down in front a TV set, that we had a proliferation of candy coated cereals that would.
And so they spent seventeen years of resources and money trying to pin down this shared monopoly that was a conjured up notion out of some academic. You see, every bad idea can only have life so long as it's insulated from any test of reality. That's why bad ideas are born in universities and make their way as quickly as possible to Washington. And so that's the way it is. But I used to have so much fun with the Fruit Loop lecture because these guys basically had the idea there if you're big, you must therefore then be bad, without ever considering the proposition that if you had not been good in the first place you never would have gotten to be big. And so they've got a problem. Now they've got a real problem. They're in a pickle now. Remember they had a similar case against IBM that went on for a long period of time until the technological change made their case obsolete.
But now here's the problem. Here's what I think is really fascinating. We are now coming on the Y2K problem. If you're not familiar with the Y2K problem, it's about trying to get a synchronization of turning over all the computers and everything run by computers so that at 12:01 on January 1st everything continues to work, right? And if you don't realize how seriously bad that is, just let me encourage you: do not read about Y2K and Revelations on the same evening. Okay? Am I right about this? And so just when the nation comes to the Y2K problem what does our ingenious government think of as a result? Go out and offend Bill Gates.
I mean, I'll tell you, there's nothing more dangerous right now I think to the American people than the anti-trust division of the Justice Department. And if you don't have a little fun laughing at them, they're going to make you cry. But they're working on a wholly obsolete, naive theory of anti-trust and, you know, what are you going to do with them? So abolish it.
SPKR: Well, on behalf of all of us at Pacific Research Institute and Chuck Baird of the Smith Center, we would like to thank Dick Armey for a wonderful presentation. I think it's been very insightful and I hope that you all enjoyed it as much as we did. Thank you and we look forward to seeing you at the 8th annual dinner.
Nothing contained in this briefing is to be construed as necessarily reflecting
the views of the Smith Center or Pacific Research Institute for Public Policy
or as an attempt to thwart or aid the passage of any legislation. 6/98