In September two years ago I spent an hour with Anibal Cavaco Silva at his offices in Lisbon. The Prime Minister is young (forty-nine), urbane, slight of build, vaguely intense in manner, in the style of the academic rather than the politician. I was with him in part for social reasons (he had become a friend of our ambassador to Portugal, with whom I was visiting), in part for professional reasons (I am a journalist never entirely off duty). We talked about this and that—he had just returned from an official visit to Washington. But his attention was elsewhere.
He blurted it out halfway through the hour. "Do you realize," he said, "that the tax bill your country passed yesterday means that when 1988 rolls along [Cavaco Silva's English is idiomatic], your highest federal tax rate will be lower than our lowest tax rate?" I didn't quite know what was the appropriate response. I think I said something pleasant about Magellan. He pursued the point, as if engaging in a soliloquy. As a former academic, he is part of a culture trained to think of high incremental taxation as—well, as the correct thing. I reminisced that ten years earlier, when my son and I had toured Denmark, our professional guide had taken us by the Danish Parliament and said to us (in a burst of statistical hyperbole), "Here in Denmark we have the highest tax rate in all Europe! It is ninety-five percent at the highest level. And next year we hope to lift that to ninety-nine percent!" He told us this as he might have told us that in the preceding Olympics the Danes had won two gold medals and four silvers but that in the next Olympics they hoped to make that three golds and six silvers.
Cavaco Silva didn't pause to consider the economic impact of the Reagan tax revolution (it is appropriately called that, I think—that long march taken by the highest tax rate, from 70 percent when Ronald Reagan entered office to 28 percent in 1988). I didn't doubt that he would be giving much thought to the economic consequences of drastically lower marginal tax rates—but not this afternoon. Today he was the dumbfounded graduate of an academic culture that thought of high taxes as a mark of civilized political behavior. That an American President who two years earlier had captured the vote of forty-nine states should have won an overwhelming vote in a Democratic Congress in favor of so large a tax reduction was on the order of waking up during the sixties to discover that Lyndon Johnson had appointed Joan Baez Secretary of Defense, with instructions to end the Vietnam War.
The tax policies of the past decade, beginning with Congress's decision to lower the top capital-gains tax from 49 to 28 percent, add up to a revolution not merely in economic thought but in ethical thought as well. It has been something on the order of a transvaluation: a general understanding that economic prosperity, brought on by success at many levels, is a general tonic for the society as a whole, and that those who bring on a substantial rise in employment and productivity ought not to be thought of as public enemies. When President Jimmy Carter was told in 1978 that the Democratic-controlled Congress was determined to do something so drastic as to cut the tax on capital gains, he reacted as if all the Ten Commandments were being violated at high noon in the Rose Garden. He inveighed with great and holy wrath against this Rich Man's Relief Bill, as did The Boston Globe, The New York Times, and The Washington Post—the three leading daily journals of the Eastern Seaboard establishment.
In due course the Treasury Department released figures quite astonishing to opponents of the lower tax rate. Tax revenues from Americans declaring capital gains were not only higher than they had been at the confiscatory rate, they were very much higher. (By 1985, by which time the rate had been further reduced to 20 percent, the revenue from capital gains was four times larger than it had been at the 49 percent rate.) Already the lowered marginal rates on income have produced increased revenues for the federal government. The whole idea of supply-side economics was being vindicated at an empirical level, and this caused great distress to the egalitarians. Professor John Kenneth Gaibraith, who in calling himself a socialist makes one of the few noncontroversial statements of a talkative lifetime, spoke from deep in the bowels of the egalitarian ethos when he said in my presence at a public debate at Harvard (and he has written to the same effect) that the lowered rates deeply disturb an important ethic in America—namely, the shared satisfaction of the public in knowing that the affluent are being taxed, well, punitively. Cavaco Silva and Galbraith and the leftist intelligentsia worldwide have been hit by the full fury of a kind of cultural dislocation.
The amplitude of the revolution is evident in the reluctance (at this writing) of Michael Dukakis to endorse what the adamant left within his party have demanded: higher taxation of the affluent and of corporations. Jesse Jackson has clung to his insistence on higher taxation (and even he has proposed for individuals a maximum rate of only 38 percent), but Dukakis has satisfied himself to say only that in a situation of great stress he would not exclude this alternative.
But any reform, before it can be said fully to engage the acquiescence of a society, needs a period of consolidation. There was little residual resistance to the Reform Bills in Great Britain, after their meaning had coursed through the minds (and hearts) of the thinking class of Great Britain. No more could it be said that the survival of the civil-rights revolution in the United States is problematic. Any return to Jim Crow is as inconceivable as a return to slavery. And a reduced tax, together with the indexation of the tax, is a solid floor under representative government. F A. Hayek, in his seminal The Constitution of Liberty, wrote that the progressive income tax is "not only the chief source of irresponsibility of democratic action but the crucial issue on which the whole character of future society will depend." The history of this century emphasizes private property as the ultimate brake on omnipotent government. Socialism, it has been written, operates by making property perpetually insecure. The flight of capital from the Third World is a reflection not so much of better opportunities elsewhere as of better sanctuaries. The Reagan revolution appears to be spreading to other countries (the incremental rates of taxation in India, Canada, France, Japan, Sweden, and Australia have been lowered). If at the turn of the century it is said that the momentum of socialism has been stopped (its analytical pretensions are intellectually dead), it will be largely on account of the restabilization of property. The Reagan revolution is a challenge to the presumption incorporated in the Phillips curve that employment cannot substantially increase without generating inflation.
Other matters of public contention have by no means been settled in any way that might be called permanent. Caution is perhaps necessary here, in that no social change can be called permanent if the historical perspective is too long-range. (From such perspectives one questions the stability of the British monarchy, or of the Bill of Rights.) But there are what one might call unsettled questions before the house.
Among these, for example, is the question of whether abortion should be acknowledged as a routine means available to any woman who desires to undo the human alchemy that results from the fertilization of a human egg. It cannot be thought of as entirely settled that any movie house or bookstore is free under the First Amendment to exhibit any movie or to sell any book. For much of this century high taxation has been viewed as a fitting Calvinistic rebuke to entrepreneurial success or inherited good fortune. This perception is no longer secure, as the mind, and the heart, turn to the beneficial social results of economic success, and to the question of the right of the individual to succeed, if he can.
A re-perception of the reasonable and just limits on taxation is much more likely to result from the victory in November of George Bush, Reaganite Republican, over Michael Dukakis, technocratic Democrat. For one thing, Dukakis has a great deal to worry about from the militant left in his party, without whose forbearance he could not have triumphed in the presidential primaries. And although the instructions in Atlanta were to go easy on the matter of taxation, he has never spoken of confiscatory taxation as morally wrong or empirically unproductive. In contrast, George Bush can be said to have been born again on the subject.
Now, George Bush is correctly viewed as something less than (or other than, if you prefer) an evangelist. He is not William Wilberforce or John Brown or Theodore Roosevelt or Franklin Roosevelt. He is a consolidator. Those who support his election with varying enthusiasm do not think of him as a tocsin-sounder for social remobilization and reform. They think of him as a man of intelligence and common sense, a public man of conservative temperament. He is comfortable in a political party disposed to believe that the multifarious problems we face are better coped with by allowing a freer rein to the private sector in contrast to the Democratic Party's disposition to seek Utopia, by act of Congress, the executive, or (if all else fails) the judiciary. George Bush would probably tell us that the major problems Americans face at home aren't problems the government is competent to solve (illegitimate children, for instance, or lousy education). Yes, there are problems that only the government can address. And many of these are problems made, or exacerbated, by government. It was not the Chamber of Commerce that crafted the public policies that have resulted in a $26 billion annual subvention to the farmers. If anything progressive is to be done to head toward a solution to that problem (there are at least 10 to 20 percent more people engaged in agricultural production than the market will sustain), it will need to be done by the government. And a President Bush would forever be reminded, I'd guess, that it was President Reagan who boasted in Iowa in 1986 during the congressional re-election campaign that his Administration had in one year paid out to the farmers more money than any preceding Administration had paid out in four years. (Voodoo farm policies.)
Yes, government will need to tackle the farm problem. And tackle, also, the problem of our failing savings-and-loan enterprises. Only government can write public policy concerning the problems of illegal immigration, or mobilize fully such statist resources as are necessary to contain AIDS, or concentrate action to appease the ozone layer.
But it isn't only government that can handle the sundry other problems that clutter the horizon. The problem of day care, for instance, for working mothers with children: ought we to think of that as a problem that goes away when the government steps in to subsidize day-care centers? What is the fallout from government day care? Is George Gilder on to something when he warns of the effects of the depersonalization of care at so early an age? And since when did baby-sitting become a federal responsibility (though it appears that Bush now thinks it that)? And what about health care? Should the federal government adopt the Dukakis precedent, which has required Massachusetts enterprise to subsidize medical costs to an extent that in days gone by would have been classified as socialized medicine?
George Bush has not (again, as of this writing) endorsed creative alternatives to the preemption of private energy to cope with these problems, and it is a universally honored presumption in the non-socialist world that private solutions tend to work better than public solutions (consider the example of the telephone system over against that of the post office). But few will deny that the presumption of engagement by the private sector is Republican, not Democratic. The most searching recent inquiry into the problems of public health was made by a hard-thinking Democrat, Joseph Califano, a former Secretary of the Department of Health, Education, and Welfare, in his book America's Health Care Revolution. He argued there for health-maintenance programs initiated and supervised by the private sector. However, his recommendations, based on his Cabinet experience, have not influenced Democratic activists who instead are calling for—what one would expect: more-substantial intervention in public health by the public sector.
In America we are suddenly face-to-face with a political problem that crystallized while we were all looking elsewhere. It is this: the House of Representatives has become a permanently Democratic institution. It has recently been calculated that the turnover in its membership is less than that of the House of Lords. More than 98 percent of its incumbents were re-elected in 1986. And this year estimates are that one hundred seats in the House will not even be contested. (Why bother?) We have a great big bloated Democratic parliamentary dynasty. How to tame it is a question for another day—but a serious question, which calls for national attention at the time of the 1990 census, attention only a Republican President is likely to insist upon. Meanwhile, those who are concerned about the implications of our House of Lords for enlightened self-rule must welcome that resilience in the Constitution which gives to the President a veto power over legislation. Who is likelier to use that veto power against a Democratic monolith, George Bush or Michael Dukakis?
The heavy rhetoric at the democratic convention, to the extent that it became specific, focused on the budget deficit. My conclusion is that most cool observers now realize that the deficit is a problem not curable by any means as easy as voting for one or another presidential candidate. Two weeks before the Democratic Convention met, Michael Dukakis was confronted with a $450 million deficit in the state whose affairs he has governed with such ostentatious flair as to earn him his party's nomination. The Duke, it was promised by his backers, would do for America what he has done for Massachusetts. That is exactly what we have to fear.
It is always a little sad to dismember something into the construction of which so much architectural talent as been put, but a few paragraphs need to be devoted to deflating Dukakis's claims to extraordinary executive skills.
The "Massachusetts miracle," for which Dukakis is widely given credit, appears to have ended in 1984, a year after he took back the governorship from Edward King. From June of that year until January of this, the state lost 89,600 manufacturing jobs. That's a decline of 13.2 percent, at a time when manufacturing decline nationally was only 3.4 percent. During this period more than 200 plants in the state of Massachusetts closed their doors.
In the past year manufacturing in the United States has rebounded; exports are up, and so is manufacturing employment. But not in Massachusetts. From January, 1987, to January, 1988, while the nation was adding 499,000 new manufacturing jobs, the state was losing 15,500. The only reason it didn't lose more is that per capita, Massachusetts is the beneficiary of defense-procurement spending that is nearly three times the national average.
Nor is the state's relatively low unemployment rate anything that Saint Francis would have recognized as a miracle: it is not difficult to have an unemployment rate slightly lower than the national average when the growth in your labor force is one sixth the national average.
Since the beginning of Dukakis's second term, in 1983, the number of employees on the state payroll in Massachusetts has increased by 12 percent. (Eight thousand six hundred workers were added to the state payroll, for a total of 80,000.) A comparable increase in federal workers would have meant 345,000 more federal employees. Dukakis's fiscal 1989 state budget of $11.6 billion represents an increase of 68 percent over the 1983 budget. Assuming constant dollars, that comes to 38 percent more state spending than in 1983. The federal equivalent of this would be $257 billion more federal spending than is currently budgeted for next year.
The threatened fiscal crisis in Massachusetts has hardly slowed Dukakis's appetite for increases in state obligations. He prides himself on having godfathered the first state universal-health-care plan. Estimates of the annual cost vary greatly but run as high as $2 billion. Moreover, he proudly proclaims the Massachusetts health-care system as the model the federal government would imitate under a Dukakis presidency. The $2 billion overhead in Massachusetts is the equivalent of $83 billion nationally.
George Bush doesn't have a record of fiscal tightness to defend, and he correctly shares the blame for the deficit with the Democratic Congress. But it is plausibly assumed that the substantial increases in military spending during the first six Reagan years have generated counter-tendencies to look for opportunities to contract unnecessary spending. These economies may never be achieved by President Bush. They would not stand a chance under President Dukakis.
Oh, yes, the military. Why the military? If the "evil empire" was dissolved at the June summit of 1988, in Moscow, there is left the problem of the old evil empire's surviving 12,000 strategic nuclear warheads, more than 7,000 tactical aircraft, 53,000 tanks, and more than 1,700 warships. Since these have not been turned into plowshares, it is always possible that the Soviet Union will resume what in fact it has never quite stopped doing—sowing the seeds of revolution and watering the harvest wherever it can do so and gain net satisfaction from the exercise (yes, Nicaragua; no, Afghanistan), and promoting disinformation and confusion wherever it can. In 1985 (alongside such as Jesse Jackson, George McGovern, and Ronald Dellums) Dukakis joined the advisory board of something called jobs With Peace, which called for $70 billion in defense cuts. Dukakis favored a nuclear freeze when that was the cause du jour among liberals. If his wish had been made policy, then the Soviet missiles in Eastern Europe would be frozen there in perpetuity, monuments to faddism masquerading as foreign policy, instead of being removed, as they will be under the terms of the intermediate-range nuclear forces (INF) treaty. He now opposes aid to the contras and is pledged to outlawing South Africa as a terrorist state. The Democratic platform calls South Africa "a uniquely repressive regime." There is a sense of intellectual and moral disorder there. In an age of gulag, Pol Pot, the Cultural Revolution, Vietnam, and Kim Il Sung, serious men do not refer to South Africa as a uniquely repressive state.
George Bush in matters of foreign policy has a more convincing sense of priorities. It may sound glib to plead the need to gain access to the mineral resources of South Africa, but in a pinch this would be a grave responsibility. But few liberals, exercised by the tragedy of Vietnam, are prepared to challenge Senator J. William Fulbright's statement that the United States government has no proper quarrel with a government, no matter how odious its domestic policies, so long as it does not seek to export them. If it is generally contemplated that we revive the Wilsonian mandate to mobilize in order to make the world safe for democracy, Dukakis had better begin by asking for a universal draft and a trebling of the defense budget.
If the vote were to hang on a division of opinion over a single matter, I would be tempted to vote for the man who sought seriously to explore the possibilities of the Strategic Defense Initiative. On this matter the division is absolutely clear: Dukakis opposes Star Wars, and Bush favors a space shield. Bush seeks to move in a different direction from offensive dominance in nuclear weaponry. A question to Dukakis: "Governor, today what happened to the Vincennes could happen to the country. There could be a suspicious something on our radar screens, heading right for midtown Manhattan. How do you propose to defend us against such a threat?"
He would have no answer. Would he intone the word deterrence? That means merely that we could fire back a missile at the party that fired at us; New York, meanwhile, has been incinerated. Under even a rudimentary version of SDI there would be a chance of saving New York from a Soviet missile, launched accidentally or otherwise, or from one fired by a terrorist Third World regime into whose hands the march of technology is bound, sooner or later, to put the necessary competence.
Since the figures are now public, I publicly recall a lunch with George Bush in the summer of 1987, when he told me that intelligence estimates were that the Soviet Union is spending $25 billion a year in hectic pursuit of anti-missile technology. The George C. Marshall Institute reports that more than 10,000 Soviet scientists are engaged in a project that attracts the economic and scientific resources of the Soviet Union as fully as our determination to land on the moon once mobilized us, twenty years ago. George Bush has a feel for this challenge, understands its humanitarian implications and the SDI's decisive potential for ending forever any temptation to a first strike or any possibility of diplomatic ultimatum based on first-strike confidence. Michael Dukakis gives no evidence of having any sense of the dimensions of the question. He conveys the impression that in matters of foreign policy he is the creature of regnant liberal clichés: on spending, on the MX, on SDI, on the contras, on Namibia, whatever. Bush grew up with the Cold War. He would, as would we all, welcome its demise, while insisting absolutely that its demise should not threaten the demise of the republic.
It would be bad journalistic manners to conceal a personal knowledge of the candidate I favor. He graduated from my college two years or so before I did. That he was a war hero made no difference on campus—there is no place more blasé about such things than a college campus two thirds of whose matriculating freshmen are veterans of a war. But his impact there was palpable. This was so because of his quite unusual social manner. College students are merciless toward cant or affectation. George Bush in his early twenties was always a center of the admiring and affectionate attention of his peers, as a modest, bright, engaging man, thoughtful and considerate, tough and competitive. I saw him frequently during the sixties and seventies, as occasions brought us together, and I have seen and judged his reactions in myriad situations. I saw him mad as hell at Ronald Reagan. (Reagan's managers had backed the opponent of Bush's son in a primary—with the sole motive of defeating, in Texas, someone called George Bush. Why? Because the George Bush was himself running for President.) I liked that quiet anger, at Reagan's violation of his own pledge not to interfere in a Republican primary contest. But a few days later I saw him together with Reagan, and observed with fascination the professionalization of the personal problem: pique and hurt and resentment had been subsumed into competitive energy and loyalty to the common enterprise.
George Bush on television does not display his best qualities, any more than did Harry Truman, or Dwight Eisenhower. At some point we will, I think, need to focus on the question Do we insist on a telegenic President? Bush has, in the phrase of one observer, filled about half the jobs there are in government. A defective character would by now be public knowledge. Those who have worked with him (which I have not done) agree that he has been tested by more varied experience of national government than any other applicant for the presidency in this century. Bush knows in his bones what a President Dukakis could learn only by an arduous tutelage of high potential cost.
One way to put the case for George Bush is that his reactions are as one would wish them to be in the leader of the free world. His historical opportunity is to bring good nature, intelligence, and an abiding faith in high standards to serve a country that has been oscillating over a period of years between an undifferentiated flirtation with angst and a tumescent heartburn for the victims of a robust society. The way out, we reason, is a re-identification with the ancient ideals of a free society. George Bush cares deeply for the success of the American proposition. To turn him down is to turn our backs on the policies that have brought us peace and prosperity these past seven years. It is to revisit the spiritual turmoil that has given us so very little opportunity, in our search for justice and mercy, to pursue our dream for an inventive and secure republic—in which the children of George Bush and of Michael Dukakis will meet the challenge of those awful odds against a nation of the people and for the people, keeping bright for America the prospects for the next century.
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