Revised June 2006
When I first took the podium to deliver the speech reprinted here, I was addressing the Detroit Economic Club, a world-renowned forum for sharing ideas. But even with my natural optimism and the publicity associated with that prestigious venue, I never imagined the amount of attention the "Seven Principles of Sound Public Policy" would receive
in the days and years that followed.
By last count, I’ve given this address
in about 100 different places, including probably 20 states and a dozen foreign
countries. The text has been translated into at least 12 foreign languages,
including Chinese, Korean, Spanish and Kiswahili. In a twist stranger than
fiction, I was invited to deliver this speech at the People’s University in
Beijing. Readers familiar with my views or with the seven principles will no
doubt be struck by the irony — and the victory — inherent in my espousing these
principles in the heart of the world’s largest communist state.
Why has interest in the "Seven
Principles of Sound Public Policy" exceeded all expectations? Looking back, I
think it was due to a gamble I took when I first wrote and delivered this
address. At the time, I began by telling the audience:
"I know that (the Detroit Economic Club)
has heard many policy addresses by many leaders in government, business and
academia — policy addresses that dealt in some detail with specific pressing
issues of the day, from transportation to education to health care and countless
other important topics. At the Mackinac Center for Public Policy, our specialty
is researching and recommending detailed prescriptions for today’s policy
questions, and I thought about doing that very thing here today.
"But upon reflection, I decided
instead to step back from the minutiae of any particular issue and offer you
something a little different: a broad-brush approach that is applicable to every
issue. I’d like us all to think about some very critical fundamentals, some
bedrock concepts that derive from centuries of experience and economic
knowledge. They are, in my view, eternal principles that should form the
intellectual backdrop to what we do as policymakers inside and outside of
government."
The reception the speech received that
day and in the years since suggests that at bottom, people value a serious
attempt to deal with issues that matter. They recognize that principles that can
be expressed in simple words are not necessarily simplistic.
Moreover, they realize that
approaching issues with an open mind does not mean approaching them with an empty one. After all,
we’ve learned a few things over the centuries. It’s not uninformed bias
that prompts us without debate to accept the notion that the sun comes up in the
east. It isn’t blind ideology that tells us that a representative republic is
superior to dictatorship or monarchy. The general assumption that private
property and free-market economies are superior to state ownership and central
planning is no longer just an opinion; rather, it is now a settled truth for people who value reason, logic, facts,
evidence, economics and experience.
The seven principles of sound public
policy that I want to share with you are pillars of a free economy. We can
differ on exactly how any one of them may apply to a given issue, but the
principles themselves, I believe, are settled truths.
These
principles are not original with me; I’ve simply collected them in one place.
They are not the only pillars of a free economy or the only settled truths, but
they do provide a solid foundation. In my view, if the cornerstone of
every state and federal building were emblazoned with these principles — and
more importantly, if every legislator understood and attempted to be faithful to
them — we’d be a much stronger, much freer, more prosperous and far
better-governed people.
One
Free people are not equal, and equal people are not free.
First, I should clarify the kind of “equalness” to which I refer in this statement. I am not referring to
equality before the law — the notion that you should be judged innocent or
guilty of an offense based upon whether or not you did it, with your race, sex,
wealth, creed, gender or religion having nothing to do with the outcome. That’s
an important foundation of Western civilization, and though we often fall short
of it, I doubt that anyone here would quarrel with the concept.
No, the "equalness" to which I refer is all about income and
material wealth — what we earn and acquire in the marketplace of commerce, work
and exchange. I’m speaking of economic equality. Let’s take this first principle
and break it into its two halves.
Free people are not equal. When people are free to be
themselves, to be masters of their own destinies, to apply themselves in an
effort to improve their well-being and that of their families, the result in the
marketplace will not be an equality of outcomes. People will earn vastly
different levels of income; they will accumulate vastly different levels of
wealth. While some lament that fact and speak dolefully of "the gap between rich
and poor," I think people being themselves in a free society is a wonderful
thing. Each of us is a unique being, different in endless ways from any other
single being living or dead. Why on earth should we expect our interactions in
the marketplace to produce identical results?
We are different in terms of our talents. Some have more than
others, or more valuable talents. Some don’t discover their highest talents
until late in life, or not at all. Magic Johnson is a talented basketball
player. Should it surprise anyone that he makes infinitely more money at
basketball than I ever could? Will Kellogg didn’t discover his incredible
entrepreneurial and marketing talent until age 46; before he struck out on his
own to start the Kellogg Company, he was making about $25 a week doing menial
jobs for his older brother in a Battle Creek sanitarium.
We are different in terms of our industriousness, our
willingness to work. Some work harder, longer and smarter than others. That
makes for vast differences in how others value what we do and in how much
they’re willing to pay for it.
We are different also in terms of our savings. I would argue
that if the president could somehow snap his fingers and equalize us all in
terms of income and wealth tonight, we would be unequal again by this time
tomorrow because some of us would save our money and some of us would spend it.
These are three reasons, but by no means the only three reasons, why free people
are simply not going to be equal economically.
Equal people are not free, the second half of my first
principle, really gets down to brass tacks. Show me a people anywhere on the
planet who are indeed equal economically, and I’ll show you a very unfree
people. Why?
The only way in which you could have even the remotest chance
of equalizing income and wealth across society is to put a gun to everyone’s
head. You would literally have to employ force to make people equal. You would
have to give orders, backed up by the guillotine, the hangman’s noose, the
bullet or the electric chair. Orders that would go like this: Don’t excel. Don’t work harder or smarter than the next guy. Don’t save more wisely than anyone else. Don’t be there first with a new product. Don’t provide a good or service that people might want more than anything your competitor is offering.
Believe me, you wouldn’t want a society where these were the
orders. Cambodia under the communist Khmer Rouge in the late 1970s came close to it, and the result was that upwards of 2 million out of 8 million people died in less than four years. Except for the elite at the top who wielded power, the people of that sad land who survived that period lived at something not much above the Stone Age.
What’s the message of this first principle? Don’t get hung up
on differences in income when they result from people being themselves. If they
result from artificial political barriers, then get rid of those barriers. But
don’t try to take unequal people and compress them into some homogenous heap.
You’ll never get there, and you’ll wreak a lot of havoc trying.
Confiscatory tax rates, for example, don’t make people any
more equal; they just drive the industrious and the entrepreneurial to other
places or into other endeavors while impoverishing the many who would otherwise
benefit from their resourcefulness. Abraham Lincoln is reputed to have said,
"You cannot pull a man up by dragging another man down."
Two
What belongs to you, you tend to take care of;
what belongs to no one or everyone tends to fall into disrepair.
This essentially illuminates the magic of private property.
It explains so much about the failure of socialized economies the world over.
In the old Soviet empire, governments proclaimed the
superiority of central planning and state ownership. They wanted to abolish or
at least minimize private property because they thought that private ownership
was selfish and counterproductive. With the government in charge, they argued,
resources would be utilized for the benefit of everybody.
What was once the farmer’s food became "the people’s food,"
and the people went hungry. What was once the entrepreneur’s factory became "the
people’s factory," and the people made do with goods so shoddy there was no
market for them beyond the borders.
We now know that the old Soviet empire produced one economic
basket case after another, and one ecological nightmare after another. That’s
the lesson of every experiment with socialism: While socialists are fond of
explaining that you have to break some eggs to make an omelette, they never make
any omelettes. They only break eggs.
If you think you’re so good at taking care of property, go
live in someone else’s house, or drive their car, for a month. I guarantee you
neither their house nor their car will look the same as yours after the same
period of time.
If you want to take the scarce resources of society and trash them, all you
have to do is take them away from the people who created or earned them and hand
them over to some central authority to manage. In one fell swoop, you can ruin
everything. Sadly, governments at all levels are promulgating laws all the time
that have the effect of eroding private property rights and socializing property
through "salami" tactics — one slice at a time.
Three
Sound policy requires that we consider long-run effects and all people, not simply short-run effects and a few people.
It may be true, as British economist John Maynard Keynes once
declared, that "in the long run, we’re all dead." But that shouldn’t be a
license to enact policies that make a few people feel good now at the cost of
hurting many people tomorrow.
I can think of many such policies. When Lyndon Johnson
cranked up the Great Society in the 1960s, the thought was that some people
would benefit from a welfare check. We now know that over the long haul, the
federal entitlement to welfare encouraged idleness, broke up families, produced
intergenerational dependency and hopelessness, cost taxpayers a fortune and
yielded harmful cultural pathologies that may take generations to undo.
Likewise, policies of deficit spending and government growth — while enriching a
few at the start — have eaten at the vitals of the nation’s economy and moral
fiber for decades.
This principle is actually a call to be thorough in our
thinking. It says that we shouldn’t be superficial in our judgments. If a thief
goes from bank to bank, stealing all the cash he can get his hands on, and then
spends it all at the local shopping mall, you wouldn’t be thorough in your
thinking if all you did was survey the store owners to conclude that this guy
stimulated the economy.
We should remember that today is the tomorrow that yesterday’s poor
policymakers told us we could ignore. If we want to be responsible adults, we
can’t behave like infants whose concern is overwhelmingly focused on self and on
the here-and-now.
Four
If you encourage something, you get more of it; if you discourage something, you get less of it.
You and I as human beings are creatures of incentives and
disincentives. We respond to incentives and disincentives. Our behavior is
affected by them, sometimes very powerfully. Policymakers who forget this will
do dumb things like jack up taxes on some activity and expect that people will
do just as much of it as before, as if taxpayers are sheep lining up to be
sheared.
Remember when George Bush (the first one) reneged under
pressure on his 1988 "No New Taxes!" pledge? We got big tax hikes in the summer
of 1990. Among other things, Congress dramatically boosted taxes on boats,
aircraft and jewelry in that package. Lawmakers thought that since rich people
buy such things, we should "let ‘em have it" with higher taxes. They expected
$31 million in new revenue in the first year from the new taxes on those three
things. We now know that the higher levies brought in just $16 million. We
shelled out $24 million in additional unemployment benefits because of the
people thrown out of work in those industries by the higher taxes. Only in
Washington, D.C., where too often lawmakers forget the importance of incentives,
can you aim for 31, get only 16, spend 24 to get it and think that somehow
you’ve done some good.
Want to break up families? Offer a bigger welfare check if
the father splits. Want to reduce savings and investment? Double-tax ‘em, and
pile on a nice, high capital gains tax on top of it. Want to get less work?
Impose such high tax penalties on it that people decide it’s not worth the
effort.
Right now in both state and federal legislatures, much
attention is being given to the question of how to deal with deficits due to
recession and declining revenues. At the Mackinac Center, we believe that
government ought to deal with such circumstances the way you and I and families
all across the state deal with similar circumstances: curtail spending. That’s
especially true if we want to stimulate a weak economy so it will produce more
jobs and more revenue. When the patient is ill, the doctor doesn’t bleed him.
Five
Nobody spends somebody else's money as carefully as he spends his own.
Ever wonder about those stories of $600 hammers and $800
toilet seats that the government sometimes buys? You could walk the length and
breadth of this land and not find a soul who would say he’d gladly spend his own
money that way. And yet this waste often occurs in government and occasionally
in other walks of life, too. Why? Because invariably, the spender is spending
somebody else’s money.
Economist Milton Friedman elaborated on this some time ago
when he pointed out that there are only four ways to spend money. When you spend
your own money on yourself, you make occasional mistakes, but they’re few and
far between. The connection between the one who is earning the money, the one
who is spending it and the one who is reaping the final benefit is pretty
strong, direct and immediate.
When you use your money to buy someone else a gift, you have
some incentive to get your money’s worth, but you might not end up getting
something the intended recipient really needs or values.
When you use somebody else’s money to buy something for
yourself, such as lunch on an expense account, you have some incentive to get
the right thing but little reason to economize.
Finally, when you spend other people’s money to buy something
for someone else, the connection between the earner, the spender and the
recipient is the most remote — and the potential for mischief and waste is the
greatest. Think about it — somebody spending somebody else’s money on yet
somebody else. That’s what government does all the time.
But this principle is not just a commentary about government.
I recall a time, back in the 1990s, when the Mackinac Center took a close look
at the Michigan Education Association’s self-serving statement that it would
oppose any competitive contracting of any school support service (like busing,
food or custodial) by any school district anytime, anywhere. We discovered that
at the MEA’s own posh, sprawling East Lansing headquarters, the union did not
have its own full-time, unionized workforce of janitors and food service
workers. It was contracting out all of its cafeteria, custodial, security and
mailing duties to private companies, and three out of four of them were
nonunion!
So the MEA — the state’s largest union of cooks, janitors,
bus drivers and teachers — was doing one thing with its own money and calling
for something very different with regard to the public’s tax money. Nobody —
repeat, nobody — spends someone else’s money as carefully as he spends his own.
Six
Government has nothing to give anybody except what it first takes from somebody, and a government that's big enough to give you everything you want is big enough to take away everything you've got.
This is not some radical, ideological, anti-government
statement. It’s simply the way things are. It speaks volumes about the very
nature of government. And it’s perfectly in keeping with the philosophy and
advice of America’s Founders.
It’s been said that government, like fire, is either a
dangerous servant or a fearful master. Think about that for a moment. Even if
government is no bigger than our Founders wanted it to be, and even if it does
its work so well that it indeed is a servant to the people, it’s still a
dangerous one! As Groucho Marx once said of his brother Harpo, "He’s honest, but
you’ve got to watch him." You’ve got to keep your eye on even the best and
smallest of governments because, as Jefferson warned, the natural tendency is
for government to grow and liberty to retreat. You can’t wind it up and walk
away from it; it takes eternal vigilance to keep it in its place and keep our
liberties secure.
The so-called "welfare state" is really not much more than
robbing Peter to pay Paul, after laundering and squandering much of Peter’s
wealth through an indifferent, costly bureaucracy. The welfare state is like
feeding the sparrows through the horses, if you know what I mean. Put yet
another way, it’s like all of us standing in a big circle, with each of us
having one hand in the next guy’s pocket. Somebody once said that the welfare
state is so named because in it, the politicians get well and the rest of us pay
the fare.
A free and independent people do not look to government for
their sustenance. They see government not as a fountain of "free" goodies, but
rather as a protector of their liberties, confined to certain minimal functions
that revolve around keeping the peace, maximizing everyone’s opportunities and
otherwise leaving us alone. There is a deadly trade-off to reliance upon
government, as civilizations at least as far back as ancient Rome have painfully
learned.
When your congressman comes home and says, "Look what I
brought for you!" you should demand that he tell you who’s paying for it. If
he’s honest, he’ll tell you that the only reason he was able to get you
something was that he had to vote for the goodies that other congressmen wanted
to take home — and you’re paying for all that, too.
Seven
Liberty makes all the difference in the world.
Just in case the first six principles didn’t make the point
clearly enough, I’ve added this as my seventh and final one.
Liberty isn’t just a luxury or a nice idea. It’s much more
than a happy circumstance or a defensible everyday concept. It’s what makes just
about everything else happen. Without it, life is a bore at best. At worst,
there is no life at all.
Public policy that dismisses liberty or doesn’t preserve or
strengthen it should be immediately suspect in the minds of a vigilant people.
They should be asking, "What are we getting in return if we’re being asked to
give up some of our freedom?" Hopefully, it’s not just some short-term handout
or other "mess of pottage." Ben Franklin went so far as to advise us, "Those who
would give up essential Liberty, to purchase a little temporary Safety, deserve
neither Liberty nor Safety."
Too often today, policymakers give no thought whatsoever to
the general state of liberty when they craft new policies. If it feels good or
sounds good or gets them elected, they just do it. Anyone along the way who
might raise liberty-based objections is ridiculed or ignored. Today, government
at all levels consumes more than 42 percent of all that we produce, compared
with perhaps 6 percent or 7 percent in 1900. Yet few people seem interested in
asking the advocates of still more government such cogent questions as, "Why
isn’t 42 percent enough?"; "How much more do you want?"; or, "To what degree do
you think a person is entitled to the fruits of his labor?"
~~~~~~~~~~~~~~~~
I yearn for the day when all Americans practice these seven
principles. I think they are profoundly important. Our past devotion to them, in
one form or another, explains how and why we fed, clothed and housed more people
at higher levels than any other nation in the history of the planet. And these
principles are key to preserving that crucial element of life we call liberty.
Thanks for the opportunity to share them with you today and thanks for whatever
you may do from this day forward to put these principles into common practice.
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