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                      CURING OUR SICK ECONOMY
                        By Jarret Wollstein

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SYMPTOMS
The U.S. economy shows many signs of being very sick, and there are few
signs pointing to recovery.

* Bank failures and business bankruptcies are at the highest levels since
the Great Depression. A list of failed and ailing companies reads like a
``who's who'' of American business: Eastern Airlines, Macy's, General
Motors. 

* Unemployment, including ``discouraged workers'', is approaching 11% and
is expected to go much higher. In Ashland, Kentucky over 2,000
unemployed workers lined up in freezing February temperatures to compete
for 25 jobs at an oil refinery. Dan Lacey, editor of Workplace Trends
newsletter, predicts that the nation's top 500 companies will cut over 4
million workers  in the next 8 years.

State and local government budgets are also being squeezed. New York is
cutting over $1 billion in welfare. Maryland Governor William Schaefer
has submitted a ``Doomsday Budget'' eliminating entire departments and
laying off thousands. In Tennessee, school bus service has been
discontinued for many rural areas.

These figures only begin to convey the human costs of our sick economy:
White-collar executives forced to take jobs at MacDonalds just to bring
in some income for their families. Middle-class families evicted from
their homes and forced to live in their cars. Welfare recipients ejected
from welfare rolls without notice and reduced to picking through garbage
for food.

TRIGGERS
The U.S. economy has been in recession since the Winter of 1988-89. Two
recent major events triggered and aggravated the crisis.

The Tax Act of 1986 crippled the real estate market -- the linchpin of
our economy. This Act eliminated many tax deductions for investing in
real estate, and increased capital-gains taxes on property. By early
1992, real estate prices had declined nationwide by 9.2%, and in some
areas the decline has been over 20%. Construction has almost stopped,
throwing thousands of workers out of their jobs.

The Savings and Loan Crisis undermined confidence in our financial
institutions, generated huge losses for taxpayers, flooded a weak market
with vast inventories of real estate, and forced banks to cut off loans
to thousands of companies. The government's inventory of unsold
properties is now over a trillion dollars, and it grows every day as
banks continue to fail.

These events triggered the recession, but they were not the underlying
cause of our economic problems. If our economy had been truly healthy,
their impact would have been minimal. The real culprit is the cancerous
growth of government.

DIAGNOSIS
For nearly 200 years America was the most prosperous society in the
world. We had the highest living standard, the best schools and most
productive industries. But that prosperity was a direct result of the
freedoms that we enjoyed -- particularly freedom of enterprise.

The Great Depression of the 1930s witnessed a fundamental change in the
role of government. Blamed on the free market, the depression was caused
by monetary controls and protectionism, and was actually made much worse
by Roosevelts's New Deal. Before the New Deal, government was primarily
a policeman, prohibiting force and fraud from the marketplace. The New
Deal legitimized peacetime price controls, massive increases in
government employment, huge rises in taxes, bureaucratic control of
industry, and natio nal welfare programs. Since the New Deal, government
has become the "Great Provider" which redistributes wealth, controls the
most minute details of the economy, and takes as much of our income as
it sees fit.

Today there is no enterprise, no transaction, and no service, however
humble, that government does not control. The state regulates what crops
a farmer can grow in his own fields, how many hours office workers can
be employed, and even the words that can be used to describe potato
chips. Government dominates education, communications, transportation,
banking, and manufacturing. In short, government now controls the entire
economy.

This massive increase in state control is far more than our
seriously-weakened economy can bear. Enterprises of every size, from hot
dog stands to large corporations, are being taxed and regulated to
death. Here are a few examples:

* In 1991, Florida enacted a 5% tax and $500 license fee for bingo
games, a principal form of entertainment for many seniors. Since the
profits at many tiny bingo clubs are less than $50 a week, the new taxes
will put up to half of the clubs out of business.

* In December 1991, Montgomery County, Maryland passed a construction
tax which will increase the cost of building homes by at least $6,000,
and the cost of building a small office building by at least $700,000.
Already hard-hit by the recession, most Montgomery County builders have
stopped new construction.

HUD Director Jack Kemp estimates that nationally, regulation is raising
the cost of the average house by 25 to 35 percent!

* In 1990 Congress enacted a 10% ``luxury tax'' on expensive cars, boats
and jewelry. As a result, in 1991 there were massive bankruptcies of
boat builders, luxury car dealers and jewelry stores. Far from producing
millions in new federal revenue, the tax has cost the government $5 in
administrative costs for every $1 collected -- while simultaneously
increasing unemployment and devastating entire industries.

Even more onerous taxes and regulations lie just ahead. The 1990 Federal
Clean Air Act (which will close many businesses without cleaning much
air) will cost the economy over $40 billion a year. Compliance with the
1991 Americans With Disabilities Act will cost U.S. enterprises tens of
billions of dollars a year. Senator Kennedy's National Health Insurance
Bill would require a new national 7% business tax. If a bill like this
passes, the U.S. will ex perience bankruptcy and unemployment levels
surpas ose of the Great Depression.

Sixty years ago, all taxes combined took less than 5% of the average
American's income. Today taxes directly consume at least 35-40% of our
income. But that is just the beginning. According to James Payne,
Director of Lytton Research and Analysis, ``For every dollar that the
federal government raises, an additional 65 cents is spent by the
private sector on tax-related expenses, including time, telephones, cars
and computers needed to comply with IRS rules.'' When you add compliance
costs, over 57% average American's income is confiscated by government.
When you also factor in economic regulations, government is reducing our
standard of living by at least 70%!

Taxes and regulations have become an intolerable social burden. We are
locked in a vicious cycle. And every new tax and regulation only
compounds the problem. But the only solution to social problems
political leaders offer are more government programs, taxes, and
regulations. Bit by bit, the liberty and entrepreneurial spirit of the
American people are being crushed. Unless we stop this vicious cycle by
reducing the power of government over our economy and lives, this
deterioration will continue an erate. Periodic recessions will become
permanent depressions. The freedom of every family and business will be
trampled flat.

Government compounds our social and economic problems because its
primary tool is legalized force: Do what the government tells you or be
put out of business or thrown in jail. Government management is
management by threats and intimidation, commands and penalties -- rather
than persuasion and incentives. How well would that approach work at
your company? Command management is the system used by every failed
socialist state in the world. It fails because people are not productive
when they are threa harassed and dispirited. You cannot command
creativity or compassion.  When the orders of bureaucrats are
substituted for the voluntary decisions of millions of individuals,
economic deterioration and corruption are the inevitable result.

A PRESCRIPTION FOR CHANGE
Polls report that Americans want both better public services and lower
taxes. We can have both -- by cutting government spending and
privatizing inefficient public services at every level, from the corner
post office, to neighborhood schools, to federal and state welfare
programs.

Government programs are no substitute for economic liberty. Tax-funded
services sqander resources because they are protected from competition
and the necessity of satisfying customers. Welfare programs consume 75%
of ``monies for the poor'' in overhead costs, versus 5-15% for private
charities. On the average, government schools cost 2-4 times more per
pupil than independent schools, spend 10 times more on administration,
and produce 8 times as many drop-outs and illiterates. Goods and
services prod r the military routinely cost 10 to 100 times more than
equivalent goods sold on the open market.

The only real cure for our sick economy is massive and rapid
privatization, deregulation, and tax reduction. To cure our sick
economy, we must take back control of our incomes, our businesses and
our lives.

Economic freedom and individual liberty are inseparable. Business and
commerce are simply manifestations of human action. When government
exercises tyrannical control over commerce, it is exercising tyrannical
control over our lives. To restore prosperity to our nation, we must
rediscover the fundamental truth so well understood by America's
founders: Prosperity requires liberty: to be productive we must be free.


                     RECOMMENDED READING LIST

America's Great Depression (Rothbard) ....................... $17.95
Better Government At Half The Price (Johnson)................  $5.95
The Coming Economic Earthquake (Burkett) .................... $24.95
The Great Reckoning: How the world will change in
the Depression of the 90s (Davidson/Rees-Mogg) .............. $21.95
Healing Our World (Dr. Mary Ruwart) ......................... $14.95


For these and other books and tapes write: Freedom's Forum Books, 1800
Market Street, San Francisco, California 94102. Add $2.50 p & h for 1st
book and $1.00 for each additional item.



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