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The Insider-Economic Freedom and Human Well Being

The Insider-Economic Freedom and Human Well Being

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Conservative Solutions for Advancing Liberty

INSIDE:
Wealth and Freedom 4
Wealth and Health 6
Principles of Federalism 10
Tax Cuts’ Success 22
InsIder
t
h
e
Winter 2007
Conservative Solutions For Advancing Liberty
Economic Freedom
and
Human Well Being
Economic Freedom
and
Human Well Being
The InsIder Winter 07
2
The InsIder Winter 2007
Edwin J. Feulner, Publisher • Bridgett Wagner, Director, Coalition Relations • Alex Adrianson, Editor, The Insider • Teri
Ruddy, Deputy Director • Colin Sharkey, Project Coordinator • Ernest Prax, Intern • Becky Norton Dunlop, Vice President,
External Relations
The Insider is published quarterly by The Heritage Foundation’s Coalition Relations Department. Begun in 1978, The Insider
brings together knowledge and news from all parts of the conservative movement. The Coalition Relations Department
serves as Heritage’s liaison to a network of some 500 policy groups and over 2,000 leading scholars and activists worldwide.
Features for The Insider are picked by the Editor and Director, but studies and other publications can be submitted for
consideration and publication on InsiderOnline.org to:
The Editor, The Insider, The Heritage Foundation, 214 Massachusetts Avenue, NE, Washington, DC 20002-4999,
(202) 546-4400, fax (202) 544-0961, e-mail insider@heritage.org. Interested in advertising with The Insider? E-mail
insider@heritage.org for more information.
Note: Nothing written here is to be construed as necessarily reflecting the view of The Heritage Foundation or as an attempt to aid or hinder the passage of
any bill before Congress.
The theme of this issue of The Insider is
that institutions matter and they matter a
lot. First up, Rebecca Hagelin asks: Why is it
that some countries have thriving, dynamic
economies in spite of few natural resources,
while other countries that are richly endowed
struggle to achieve any
economic progress at
all? She finds that insti-
tutions of economic
freedom are the key
ingredient for economic
success. Picking up the
thread, Indur Goklany
describes how the spread of economic suc-
cess helps people around the world lead safer,
cleaner, healthier lives.
Next we note the important role of state
policy in our federal system. Making states
sovereign in their fields of competence
allows them to experiment and find those
policies best suited for their citizens. Presi-
dent Ronald Reagan thought this idea so
important that he set it down in a statement
of principles. Unfortunately, says Eugene
Hickok, a centralizing tendency has over-
taken education policy: Citizens now see
schools as something to be fixed with money
from the federal government, rather than a
problem for which they should hold state
governments accountable. Hickok wonders
what this development portends for respon-
sible citizenship.
States can make bad education poli-
cies, too, but who fixes a bad policy
when it is being pursued simultane-
ously by both the federal and the state
governments? George Leef describes how
making higher education an entitlement has
corrupted the college experience for millions
of students.
Demonstrating that entrepreneurship in
policy is alive and well, some states have
adopted a good idea of the federal govern-
ment: transparency in spending. Brandon
Dutcher and Sen. Tom Coburn describe how
this idea can help Oklahoma.
In other articles, Peter Saunders reminds
us that the welfare state mentality knows no
borders, John Hendrickson reviews the his-
toric successes of tax cuts, Rob Bluey notes
the impact of bloggers on policy, and Michael
Sullivan provides a how-to on podcasting.
Editor’s notE
Bridgett Wagner
Director of Coalition Relations
Alex Adrianson
Editor of The Insider and InsiderOnline.org
3
Visit Insideronline.org
Wealth and Economic Freedom
Go Hand in Hand 4
No nation needs to remain stuck in poverty.
A Virtuous Cycle 6
How greater wealth is making the
world healthier, and greater health
is making the world wealthier.
Federalism: Statement of Principles 10
Ronald Reagan got it; do we?
Federalism and Citizenship 12
Decentralized government yields
a more engaged citizenry.
Education as an Entitlement 15
How making it easy for students to go to
college has harmed college—and students.
‘Googling’ State Tax Dollars 21
States borrow a good idea from the feds.
What We Believe
Bloggers Leave Their
Mark on Capitol Hill 27
New media fight for transparent
government.
Who We Are
Speaking in Your Own Voice 29
How podcasting can help you get
your message out.
Winter 2007
What We Do
A Brief Review of the Success
of Tax Cuts 22
Economic history you can use.
What the Government Giveth,
the Government Taketh Away 24
True in Australia and everywhere else:
To pay Paul, government must rob Peter.
6
15
24
12
The InsIder Winter 07
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I
t’s a question that has perplexed politicians,
philosophers, and philanthropists for gen-
erations: Why are some countries rich and
others poor?
Some say it’s a matter of luck—favorable
geography or the presence of some high-demand
resource. Others say it’s because wealthy coun-
tries don’t give poor ones enough financial aid.
Still others insist that rich countries keep the
poor ones down and exploit them.
What we need aren’t theories, though, but
facts. What does the evidence show?
For more than a decade, The Heritage
Foundation and The Wall Street Journal have
carefully examined the evidence. Every year,
for the Index of Economic Freedom, they sift
through data on everything from inflation to
imports, from tariffs to trade—and they do it
for every country. And one big-picture message
about poverty and wealth consistently shines
through, year after year: Wealth and economic
freedom go hand in hand.
Favorable geography? Tell that to the people
of Asia, where some of the world’s wealthiest
countries can be found remarkably close to some
of the poorest. Here, you’ll find Hong Kong, the
top-ranked country in the 2007 Index—a place
with a $212 billion economy and a per capita
income of $30,822. But you’ll also find poverty-
stricken North Korea, which finished dead last
in the Index. You’ll find wealthy Singapore and
dirt-poor Bangladesh, and so on.
Asia isn’t the only region where such dispar-
ities exist. Some nations in South America suf-
fer from terrible poverty; Venezuela, despite its
huge oil reserves, is in pretty bad shape, with
high unemployment and a per capita income
of $6,043. But did you know that average
income is 80 percent higher in nearby Chile, a
big importer of oil? Why? Because Chile is one
of the most economically free nations in the
world. Ranked No. 11 on the Index’s overall
list, it beats many European nations.
The list could go on, but the trend should
be clear: Poverty and riches aren’t dependent
on chance or luck. What really makes a differ-
ence is policy. More specifically: How much
economic freedom do people enjoy? Time and
again, the Index shows, the more economically
free people are, the more wealth they generate.
Here in the United States (fourth globally
in the Index rankings), we enjoy many eco-
By Rebecca Hagelin
W
h
a
t

W
e

B
e
l
i
e
v
e
Wealth

Economic
Freedom
Wealth
and

Economic
Freedom
Go hand in hand
5
Visit Insideronline.org
nomic freedoms. But how
often do we consider the
difference they make in our
lives? Say you want to start a
business. Sure, we complain
about doing the paperwork,
but it takes an average of
just five days. Compare that
to the world average of 48
days. Heck, compare it to
Venezuela, where it would
take about 141 days—more
than four months! And once
you get your business going,
our government leaves you
largely free to operate it as you see fit. Not
in Venezuela, where complicated and incon-
sistent regulations make running a business
extremely difficult.
Take another example. Here in the United
States we can trade freely with most other
countries. We enjoy dynamic financial mar-
kets, inflation is low, and we’re open to for-
eign investment. It’s easy to take all this for
granted, even to think ourselves inherently
wonderful, but what really separates us eco-
nomically from many other nations isn’t talent
or wisdom but freedom. Were our markets,
trade, and investment climate as constricted as
that of Bangladesh, would we have an $11.7
trillion economy? No way.
Other factors, ones we don’t even think of,
exert a powerful influence on our “pursuit of
happiness.” Take property rights. Yes, they
are a component of economic freedom, and
a vitally important one. If a business owner
didn’t know that our legal system would fairly,
impartially and consistently defend his proper-
ty holdings, how could he expand his business
and ensure that it works as effectively and effi-
ciently as possible? Without property rights, he
and thousands like him couldn’t concentrate on
running a profitable business. You can imagine
how this would damage our economy.
Still, we shouldn’t pat
ourselves on the back too
heartily. Our economy is
hamstrung by two seri-
ous problems: government
spending and high tax rates.
Our top corporate rate of 35
percent, in particular, makes
it hard for U.S. firms to
compete globally; 29 of our
30 top trading partners tax
corporate profits at lower
rates. Even French President
Jacques Chirac has called
for reducing his country’s
top corporate rate to 20 percent. Our federal
spending, meanwhile, has surged 45 percent
since 2001. With the right cuts in spending and
tax rates, there’s no reason we should have to
stay at No. 4 on the Index list.
Fortunately, no country is yoked to a partic-
ular level of economic freedom. Governments
can make changes—and, in turn, make dramat-
ic improvements. Index editor Tim Kane, for
example, recently told me how the introduc-
tion of property rights in New Zealand’s fish-
ing industry has encouraged ocean preservation
efforts there—which, he notes, help both the
environment and the industry’s bottom line.
In short, freedom isn’t a zero-sum game. The
Index shows that governments that disavow
repressive practices, open their economies and
free the entrepreneurial spirit of their people
aren’t giving up anything. They’re unleashing
one of the most mutually beneficial forces on
earth—and making it possible for people not
only to increase their material wealth, but to
live their lives in peace and dignity.
Ms. Hagelin is vice president of Communica-
tions and Marketing at The Heritage Founda-
tion and author of Home Invasion: Protecting
Your Family in a Culture That’s Gone Stark
Raving Mad.
Poverty and riches aren’t dependent
on chance or luck. What really
makes a difference is policy.
The InsIder Winter 07
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By Indur Goklany
A Virtuous C
y
cle
how Greater
WEALTH
Is Making
the World
healthier,
and Greater
HEALTH
Is Making the World
Wealthier
7
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G
reater wealth can advance human wel-
fare in a myriad of direct and indirect
ways. First, it means increased resources
for advancing literacy and education, which
itself is one of the more important indicators
of well being. Hence, the proportion of the
population enrolled in post-secondary edu-
cational institutions increases with wealth.
Second, greater wealth also
reduces the incentives for
parents to put children to
work to supplement family
income. Those two factors
act together to help reduce
child labor rates.
Moreover, increased edu-
cation helps provide popu-
lations with the knowledge
and information neces-
sary to live a healthier life
through wider understanding of the impor-
tance of better food and nutritional habits,
proper hygiene, safe water, immunization
and pasteurization, and other things. It also
enables populations to better and more easily
assimilate and keep track of new information
relevant to these matters as such knowledge is
created and becomes available. Equally impor-
tant, wealthier societies, not surprisingly, can
better afford welfare-enhancing technolo-
gies. For instance, they spend proportionately
more on health care than poorer ones. That,
combined with the fact that their GDPs per
capita are higher, translates into significantly
more spending on health care per capita by
or on their behalf. Thus, they have better
access to improved health technologies. Such
technologies include not only “old” technolo-
gies (such as water treatment to produce safe
water, sanitation, basic hygiene, vaccinations,
antibiotics, and pasteurization, which are still
underutilized in the poorer countries, precisely
because they are too poor to afford them), but
also newer science-based technologies (such as
AIDS and oral re-hydration therapies, organ
transplants, mammograms, and other diag-
nostic tests, some of which are quite expensive
at present).
Health can also be advanced indirectly
through technologies that increase food avail-
ability. Wealthier countries can better afford
yield-enhancing agricultural technologies, such
as special seeds; inputs, such
as fertilizers for nutrient-
poor soils or lime for acidic
soils; and methods to reduce
spoilage and wastage on
and off the farm. Although
many of those technologies
are pretty mundane and
far from “high tech,” not
everyone can afford their
costs. For instance, while
farmers in richer countries
have sometimes overused fertilizers, especially
in the past, the problem in poorer countries
is that their farmers are unable to afford suf-
ficient fertilizers to realize the productive
potential of their land. This problem, as well
as the inability to afford other yield-enhanc-
ing technologies, are the reasons that the
richer the country, the higher its crop yield.
Higher crop yields translate into more food.
And if, despite that, supply can’t meet demand
and additional food is needed, then if one is
wealthy, one can buy what one cannot pro-
duce locally. Trade facilitates that by moving
agricultural crops and products voluntarily
from surplus to deficit areas. Global trade has,
in fact, globalized food security. Trade allows
not only richer states, such as Hong Kong,
Japan, Saudi Arabia, and Singapore, but also
developing countries in sub-Saharan Africa to
make up their food shortfalls. In 1998–2000,
net cereal imports by countries of sub-Saharan
Africa were equivalent to 20.4 percent of their
production. Thus, United States wheat goes to
China, while produce from Chile, for instance,
Greater wealth leads to greater
education; to lower rates of child
labor; to higher food production;
to greater access to food supplies
and safe water; and, eventually, to
better health, to lower mortality,
and to higher life expectancies.
The InsIder Winter 07
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comes to the United States. Moreover, the
transportation systems and associated infra-
structure that trade depends on—hardware
such as ships, refrigerated trucks, roads, and
rails, as well as software such as mechanisms
and techniques to transfer money, hedge
risks, and so forth—are themselves products
of technology, capital, and human resources.
Not surprisingly, richer countries have more
food supplies per capita. Greater wealth also
makes it more likely that a society will estab-
lish and sustain food programs for those on
the lower rungs of the economic ladder. There-
fore, although “you can’t eat GDP,” if GDP is
larger you are less likely to go hungry or be
undernourished (except by choice).
But more food not only means fewer hun-
gry stomachs, it also means healthier people
who then are less likely to succumb to infec-
tious and parasitic diseases. Historically,
reductions in hunger and undernourishment
have been among the first practical steps
nations have taken to improve public health,
to reduce infant mortality, and to increase life
expectancy. Analysis by the Food and Agricul-
ture Organization (FAO) indicates that mal-
nutrition can increase the child mortality rate
from common childhood diseases. Compared
to children who have adequate nourishment,
FAO’s analysis shows that the risk of death is
2.5 times higher for children with mild mal-
nutrition, 4.6 times higher for children suf-
fering from moderate malnutrition, and 8.4
times higher for the severely malnourished.
Moreover, wealthier societies are more able to
target capital and human resources on public
health measures and technologies in order to
increase the availability of sanitation, water
supplies, immunization, and antibiotics, which
further reduces infant mortality and increases
life expectancies.
Thus greater wealth—through a multiplic-
ity of sometimes overlapping pathways—leads
to greater education; to lower rates of child
labor; to higher food production; to greater
access to food supplies and safe water; and,
eventually, to better health, to lower mortality,
and to higher life expectancies.
Wealthier is more educated, less hungry, and
healthier. But the converse is also true: more
9
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educated, less hungry, and healthier is gener-
ally also wealthier. Less hungry and healthi-
er people are more energetic, less prone to
absenteeism, and, therefore, more productive
in whatever economic activity they undertake.
Robert W. Fogel, the Nobel Prize-winning
economist, estimates that the levels of food
supplies in 18th-century France were such
that the bottom 10 percent of the labor force
did not have sufficient food to generate the
energy needed for regular work, and the next
10 percent had enough energy for about half
an hour of heavy work (or less than 3 hours
of light work). Economic historian Richard A.
Easterlin notes that, on the basis of a United
Nations study, when malaria was eradicated in
Mymensingh (now in Bangladesh), crop yields
increased 15 percent because farmers could
spend more time and effort on cultivation. In
other areas, elimination of seasonal malaria
enabled farmers to plant a second crop. Simi-
larly, according to the World Bank, the near-
eradication of malaria in Sri Lanka between
1947 and 1977 is estimated to have raised its
national income by 9 percent.
Moreover, healthier people can also devote
more time and energy to their own education
and the development of their human capi-
tal. Good health is particularly important
during children’s formative years. Similarly,
improved food supplies and nutrition by
themselves might help increase a population’s
educability, which is one of the premises
behind school meals programs. A healthier
and longer-lived population is also more like-
ly to more fully develop its human capital,
which then aids in the creation and diffusion
of technology. The benefits to individuals,
families, and societies of investing in higher
education, post-doctoral research fellow-
ships, and medical residencies increases sig-
nificantly if individual beneficiaries live to 70
rather than a mere 30 to 35, as was the case,
for instance, before the advent of modern
economic growth. Thus, it is not surprising
that levels of education have gone up as life
expectancy has advanced or that more and
more aspiring doctors and researchers today
spend what literally used to be a lifetime to
acquire the skill and expertise necessary to
pursue careers in medicine, research, and
institutes of higher learning. And once having
acquired this expertise, those researchers are
poised to contribute to technological innova-
tion and diffusion in their chosen fields and
to guide yet others along the same path. Thus
human capital breeds additional human capi-
tal. Hence, better health helps raise human
capital, which aids the creation and diffusion
of technology, further advancing health and
accelerating economic growth.
Mr. Goklany is an expert on globalization and
environmental issues, including sustainable
development, technological change, food, and
health. He is the author of The Precaution-
ary Principle and Clearing the Air: The Real
Story of the War on Air Pollution. This article
is excerpted from his book The Improving
State of the World: Why We’re Living Lon-
ger, Healthier, More Comfortable Lives on a
Cleaner Planet, © 2007 by the Cato Institute.
The InsIder Winter 07
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Federalism
statement of Principles
By Ronald W. Reagan
The InsIder Winter 07
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Every now and then, it’s worth revisiting
certain principles of good government—like
federalism. A good place to start is with Presi-
dent Ronald Reagan’s Statement of Principles,
issued on April 8, 1986, and reproduced on the
opposite page. Reagan’s principles are relevant
to many policy problems. One such is educa-
tion policy, a current topic of national debate.
Discussions of education policy typically
focus on things like budgets, testing, accredi-
tation, and standards. Today policymakers are
considering expanding the federal No Child
Left Behind program so that it encompasses
high school as well as elementary school chil-
dren. Further, some are even talking about
NCLB as a model for a higher education test-
ing regime.
Reagan’s principles direct us to a different
set of questions. Is the federal government
uniquely competent to set education policy for
every state? Could state experimentation help
us find better solutions for increasing educa-
tional achievement? Is there really only one
best education policy that fits every state?
At page 12, Eugene Hickok notes that feder-
alizing education policy threatens to undermine
the important role of responsible citizenship. If
the federal government intrudes where state
policy fails, then why should citizens bother
holding their state governments accountable
for performance?
At page 15, George Leef shows that higher
education is plagued, not be a lack of govern-
ment action, but by overly generous subsidies
from both the states and the federal government.
As we go to press, the U.S. Congress is consid-
ering expanding student loans and creating a
federal testing regime. How are the states to
fix bad policies when the federal government is
moving in exactly the wrong direction? —Ed.
JJ
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Xxxxxxx
xxxxx
xxxxxx
xxxxxx
I. Federalism is rooted in the knowledge
that our political liberties are best assured
by limiting the size and scope of the
national government.
II. The people of the States created the
national government when they delegat-
ed to it those enumerated governmental
powers relating to matters beyond the
competence of the individual States.
All other sovereign powers, save those
expressly prohibited the States by the
Constitution, are reserved to the States
or to the people.
III. The constitutional relationship among
sovereign governments, State and nation-
al, is formalized in and protected by the
Tenth Amendment to the Constitution.
IV. The people of the States are free, subject
only to restrictions in the Constitution
itself or in constitutionally authorized
Acts of Congress, to define the moral,
political, and legal character of their lives.
V. In most areas of governmental concern,
State and local governments uniquely
possess the constitutional authority, the
resources, and the competence to dis-
cern the sentiments of the people and
to govern accordingly. In Jefferson’s
words, the States are “the most com-
petent administrations for our domes-
tic concerns and the surest bulwarks
against anti-republican tendencies.”
VI. The nature of our constitutional system
encourages a healthy diversity in the public
policies adopted by the people of the sev-
eral States according to their own condi-
tions, needs, and desires. In the search for
enlightened public policy, individual States
and communities are free to experiment
with a variety of approaches to public issues.
VII. Acts of the national government—whether
legislative, executive, or judicial in nature—
that exceed the enumerated powers of that
government under the Constitution violate
the principle of federalism established by
the Founders.
VIII. Polices of the national government should
recognize the responsibility of—and should
encourage opportunities for—individuals,
families, neighborhoods, local govern-
ments and private associations to achieve
their personal, social, and economic objec-
tives through cooperative effort.
IX. In the absence of clear constitutional or
statutory authority, the presumption of
sovereignty should rest with the indi-
vidual States. Uncertainties regarding
the legitimate authority of the national
government should be resolved against
regulation at the national level.
X. These principles should guide the depart-
ments and agencies of the national
government in the formulation and imple-
mentation of policies and regulations.
JJ
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April 8, 1986
The InsIder Winter 07
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By Eugene W. Hickok
Federalism
and
J3
Visit Insideronline.org
By Eugene W. Hickok
W
hen the idea was born in Philadelphia
in the summer of 1787, federalism was
seen not only as a way to check national power
with state sovereignty, but also as a way to keep
government at every level in check. Citizens,
active in state and local affairs, would keep
state and local governments in their place, and
states would do the same thing with the new
national government. As a system, federalism
would have a salutary effect upon citizenship,
nurturing it and encouraging self-government as
it simultaneously kept the power of government
in its place. Perhaps because the Framers of the
Constitution knew that the nature of federalism
would change over time, they understood that,
in the end, good government required not only
a limited government of competent powers but
also active, informed, and engaged citizens.
Federalism, it was thought, would encourage
the formation of such citizens.
Indeed, it may be that federalism’s most
important contribution to constitutional gov-
ernment in this country is its role in nurtur-
ing and sustaining self-government and good
citizenship, essential but difficult tasks in any
republic. In a liberal democratic society such
as the United States, individuals are free, by
and large, to fashion their own brand of par-
ticipatory citizenship. Because all individuals
possess natural rights, no special obligations
are placed upon them and relatively few spe-
cial rights or privileges are awarded to them.
Citizenship in the United States, in other
words, may mean a great deal or very little
indeed; it is pretty much up to the individual.
The paradox of this, however, is that a healthy
republic relies upon citizens for both direction
and support.
The advent of the modern administrative
state, accompanied by the transformation of
federalism, the growth in government at every
level, and the increased expectations of the
American people, have combined to contribute
to a transformation in the character of citizen-
ship in America. A nation of citizens who make
responsible choices and elect individuals to
make responsible choices has been transformed
into a nation of consumers of government who
pay tax dollars to purchase more and more
government-delivered goods and services. Indi-
vidual citizens who once were agents for change
in society and in government have become pas-
sive subjects of an immense nation-state. Today,
it is commonplace for people to look to the
government for relief from the most ordinary
of concerns, support for the most basic kinds
of endeavors, and vindication for the most
elementary of damages. People have become
clients of the state as opposed to the masters of
it. They have become dependent upon govern-
ment rather than government being dependent
upon them.
The education reforms introduced by Presi-
dent George W. Bush and embraced with
strong bipartisan support in Congress provide
a nice illustration of what is happening to the
American character. Education has always
been a state and local issue. Even as Washing-
ton allocates more money than ever in sup-
port of elementary and secondary education,
about 90 percent of what is spent on public
education in a state is revenue generated at the
state and local level. The rules governing pub-
lic education are, by and large, state and local
rules. The decisions on the day-to-day opera-
tions of America’s public schools are driven at
the local level. The problem is that America’s
schools are not doing a very good job. Indi-
cators such as test scores tell us our students
and schools are just not performing well and
that there are real “achievement gaps” among
student groups, with minority and low-income
students trailing their white counterparts.
American public education is not working as
well as it should—as it must.
President Bush asked Congress to enact
new national legislation that requires each
state to enact higher academic standards for
The InsIder Winter 07
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students, regulations ensuring teachers are
“highly qualified,” and policies to test every
student in grades 3 through 8 annually, and to
hold schools accountable for the performance
of their students. He also asked Congress to
increase federal spending for America’s schools,
and Congress went along. Today, the national
government plays a much larger role in the
administration, oversight, and governance of
America’s public schools. It is a bit early to
know whether the schools, the students, and
the nation will be better off.
But we do know some things. As the 21st
century dawns in America, its citizens have
turned to government to do something they
once did for themselves. Recognizing that
their schools are not getting the job done, they
looked to Washington to do something about it.
They wanted more from their schools and their
students and their teachers, and so they looked
to Washington to pass a law to require more
from their schools and their students and their
teachers. None of this is necessary, of course.
It shouldn’t take an act of Congress to set high
standards for schools. It shouldn’t take an act of
Congress to hold a public school accountable to
the public. But in 21st century America, public
education has become something government
provides rather than something the “public”
or the “people” provide; public education has
been transformed into government schooling. It
is something people expect from their govern-
ment and purchase from it with their tax dol-
lars. It is as though the public is no longer really
a part of public education.
This transformation in the character of
America and in American citizenship, illus-
trated by the education reforms noted above, is
the result of many things. And it has transpired
over time, surely. But interestingly, it is a trans-
formation that those who created the American
Republic anticipated and sought to avoid, in
part through federalism. They recognized that
good government would depend on both the
structure of the government and the civic virtue
of the people. Federalism, as we have seen, was
considered one way to achieve both.
Federalism’s contribution to the structure
of government served two purposes initially. It
provided another check on the consolidation
of power in the national government while
ensuring the vitality of state and local govern-
ment. The vitality of state and local govern-
ment was considered important, as well, to
nurturing the sort of civic virtue so necessary
to the creation of good citizens and the main-
tenance of good government.
Citizenship is all about self-government:
people actively participating in the public
affairs of their communities and states. As
this happens, the tendency all people have to
pursue their own individual self-interests is
blunted by a concern for a wider general civic
responsibility. Managing the tension that can
exist between individual self-interest and the
community or public interest is particularly
important in America, where the emphasis is
on rights rather than individual responsibili-
ties. Here, in order for popular government
to succeed, there would be a need to ensure
that there were public-spirited citizens, thus
making the cultivation and nurturing of civic
virtue all the more important. There would
be citizens interacting with one another in the
discussion and pursuit of public issues within
a community in which every citizen recogniz-
es his well-being is related to the well-being of
his fellow citizens. If civic virtue is the foun-
dation on which citizenship is built, then fed-
eralism is the crucial structure for nurturing
good citizenship.
Dr. Hickok is as an adjunct professor of politi-
cal science at the University of Richmond, and
is a Bradley Fellow at The Heritage Founda-
tion. This article is an excerpt from his book
Why States? The Challenge of Federalism,
forthcoming from The Heritage Foundation.
Education as an
Entitlement
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I
n a market, purchasers of goods and servic-
es usually pay full price for the things they
buy and they usually have reasonably accurate
information about the benefits they will get
from them. In the automobile market, much as
manufacturers might like to see it, most people
do not drive luxury SUV models. Even if Cadil-
lac were to advertise that life without its Esca-
lade model would hardly be worth living, there
would be little increase in sales. Most drivers
know that the benefits are not sufficient to war-
rant the unsubsidized expense associated with
buying and operating such a vehicle.
When it comes to higher education, howev-
er, the circumstances are different. Because of
government subsidies, most students and their
families do not have to bear the full cost of a
decision to enroll in higher education. While
we frequently hear complaints over the rising
cost of going to college—most often in con-
junction with a political proposal for action
to solve this alleged problem—few American
students have to forgo higher education for
financial reasons. Researchers Jay Greene and
Greg Forster found that, in 2000, the number
of students who enrolled in four-year institu-
tions (1,341,000) was greater than the number
who were qualified (1,299,000). The authors
concluded: “While some college-ready stu-
dents are undoubtedly denied the opportunity
to attend college, the results of this study sug-
gest that the number of such students is not
large.” A 2004 report by the Congressional
Budget Office came to the same conclusion,
finding that financial hurdles are “not a major
obstacle to college attendance.”
By keeping the price of college artificially
low with state and federal subsidies, atten-
dance is increased. The increase in demand
for higher education has led to rising costs
and calls for more governmental aid to offset
them. Keeping the price of college artificially
low also appears to have an adverse effect on
student effort. The more heavily subsidized the
student, the less effort he puts forth. Econo-
mist Aysegul Sahin summarizes her findings as
follows: “[L]ow-tuition, high-subsidy policies
cause an increase in the ratio of less highly-
By George C. Leef
Education as an
Entitlement
How Making It Easy for Students to Go to College
Has Harmed College—and Students
The InsIder Winter 07

motivated students among the college gradu-
ates and that even the highly-motivated ones
respond to lower tuition levels by choosing to
study less.”
Not only is college highly subsidized, but
many young people obtain poor information
about it. A major source of that information
is high school teachers and counselors. Pro-
fessors Kenneth Gray and Edwin Herr write
in their book Other Ways to Win: “Among
the ‘true believers’ in one way to win are high
school teachers and guidance counselors. Both
should know better. … According to disturbing
research by Oakes (1985) and others, teachers
in the average high school have a pejorative
view of noncollege-bound teens. … An amaz-
ing 57.2% of the students in even the lowest
quartile said their teachers had recommended
that they go to college.”
Teachers and counselors strongly encour-
age most high school students—even aca-
demically weak ones—to enroll in college.
Students repeatedly hear the conventional
wisdom that getting a college degree will
make the difference between a comfortable
life and a life of drudgery. Rarely do they
hear it said that going to college could be a
costly mistake and that other opportunities
might be better for them. The “go to college”
siren song lures into higher education a large
number of students who are not interested in
college except as a means of obtaining a sup-
posedly indispensable credential.
The educATIonAl VAlue of college
For many students, college is several years
of fun between high school and the time when
they’ll have to start earning a living—several
years of “beer and circus,” to borrow the title
of a book by Professor Murray Sperber. As
Milton Friedman puts it, college “attract(s)
many young men and women who come
because the fees are low, residential housing
and food are subsidized, and above all, many
other young people are there. For them, college
is a pleasant interlude between high school and
going to work.” Furthermore, many young
people see going to college as the prerequisite
to landing a good job and enjoying the good
life. Those students want the degree, but with
as little effort as possible. In David Labaree’s
view, the credentialism rampant in American
education undercuts learning since it means
“directing attention away from the substance
of education, reducing student motivation to
learn the knowledge and skills that constitute
the core of the educational curriculum.” With
large numbers of students enrolled who have
little or no interest in academic pursuits, it
is hard to disagree with the view of Stephen
Balch, President of the National Association of
Scholars, that “we don’t so much have higher
education as we have longer education.”
Why do colleges and universities want stu-
dents who aren’t interested in studying? It’s
because they bring in revenue. Many colleg-
es and universities would face a tremendous
financial problem if they accepted only seri-
ous, well-prepared students. Gray and Herr
remark that the excess capacity at schools
that have expanded “removes the obstacle of
admissions standards; as enrollment declines,
colleges take in fewer qualified applicants and
then finally all applicants.” Some administra-
tors even admit that they have made a Faus-
tian bargain—large enrollments at the expense
of academic integrity. Stephen C. Zelnick, vice
provost for undergraduate studies at Temple
University, says that academic demands on
students “went slack” in the mid-1990s “when
Temple decided to open its doors to all and
sundry in order to pay its bills.”
Fifty years ago, when disengaged students
were accepted in college (which was rarely the
case), they would usually drop out or flunk
out quickly. Prevailing academic standards
were too demanding for them. As more and
more disengaged students enrolled, however,
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and administrators decided
that they wanted them to
remain in school for the sake
of the institution’s bottom
line, the inevitable result
was downward pressure on
academic standards. Where
there used to be difficult
mandatory courses—calcu-
lus and laboratory sciences,
for instance—now students
often have the option of tak-
ing simpler courses instead.
At many institutions, the
rigor of the curriculum has
been eroding steadily in an
effort to cater to students’
desires for courses that are
entertaining and easy. The curriculum has also
been eroding due to the desire of professors to
teach only very specialized courses that track
their current research interests. Harvard pro-
fessor Harvey Mansfield observes that among
the reasons for the ouster of Harvard’s former
president Larry Summers was the fact that he
“proposed a curriculum review that would
result in solid courses aimed to answer stu-
dents’ needs, replacing stylish courses designed
to appeal to their whims. Such courses would
require professors to teach in their fields but
out of their specialties; no longer would they
assume that the specialized course they want
to teach is just the course the students need.”
Owing to the degradation of the curriculum,
there is reason to believe that the typical col-
lege graduate today is no better educated than
was the typical high school graduate of 1955.
Attempting to teach a course where a large
percentage of the students are “disengaged”
leads to difficulties that often cause profes-
sors to compromise their standards and cater
to student preferences. Consider this passage
from Peter Sacks’ book Generation X Goes to
College: “Overwhelmingly, our colleagues told
us they were watering down
their standards in order to
accommodate a generation
of students who had become
increasingly disengaged
from anything resembling
an intellectual life.” Desiring
to avoid bad student evalua-
tions or simply to be popu-
lar, many professors have
chosen to lower their expec-
tations, remove challenging
material, and give only high
grades. Murray Sperber calls
it “the faculty-student nonag-
gression pact”—the implicit
understanding that students
will be given high grades in
return for minimal work, while the professor
puts little effort into teaching the course so he
can concentrate on his research.
Whereas students’ minds used to be the
chief concern of colleges and universities, it
is now more their bank accounts (more accu-
rately, that of their parents and of the tax-
payers). If students happen to learn anything
useful while enrolled, that’s good, but if not,
as long as they’ve paid their bills, it’s not the
university’s problem.
The dAmAge of
credenTIAl InflATIon
If college studies often do little to aug-
ment a person’s human capital, then why is it
that, on average, college degree holders earn
so much more than do those who don’t have
them? That fact stands as an apparent refuta-
tion of the argument that college studies are of
minimal benefit to many students.
There is a logical problem in moving from
the observation that college degree holders
on average earn more than do non-degree
holders to the conclusion that particular non-
degree holders would secure better, higher-
Keeping the price of college arti-
ficially low appears to have an
adverse effect on student effort.
The more heavily subsidized the
student, the less effort he puts forth.
The InsIder Winter 07
JS
paying employment if only
they could go to college and
obtain a degree. After all,
those who go to college and
those who don’t are people
with very different charac-
teristics. Instead of looking
at average earnings for each
group, it is more sensible to
focus on the workers at the
margin. The right question
to ask is this: For high school
graduates who might have
gone to college but did not,
is it the case that their earn-
ings would be significantly
higher if they had instead
enrolled in college?
A decision to forgo col-
lege—especially in light of all the pressure on
students to enroll—is usually deliberate and
informed. If a young man or woman chooses
to enter the labor force right after high school,
that probably reflects an intelligent weighing
of the relevant costs and anticipated benefits.
For example, a young man may like the idea
of working with his hands, perhaps as an auto
mechanic, and dislike the work required in col-
lege—reading, studying, writing papers. If he
concludes that college would be a poor use of
his time and money because his interests and
aptitudes do not lie in an academic direction,
that decision is presumably a sensible one.
Also, there are quite a few job opportuni-
ties available to high school graduates that
compare favorably in earnings with many of
the jobs where a college degree is “required.”
That young man who forgoes college to
become an auto mechanic probably earns
more than a classmate who spent four years in
college and then took a low-skill job such as
working as a theater usher, office clerk, or der-
rick operator—jobs that to a significant degree
are now held by people who have earned col-
lege degrees. Contrary to
the conventional wisdom,
having a college degree is
neither a necessary nor a suf-
ficient condition for finding
employment that pays well
enough to enjoy a comfort-
able life. People who don’t
have the interest or aptitude
for serious college studies at
age 18 may find that later
in life they do, but those
who enroll just because they
think that the mere posses-
sion of a college degree is
the passport to success will
just dig themselves a finan-
cial hole.
It simply is not true that
everyone would be better off with more years
of formal education, as the average earn-
ing comparison implies. Most if not all low-
income individuals who do not have college
degrees would have no brighter job prospects
even if they could manage to earn a college
degree. Indeed, given the monetary and oppor-
tunity cost involved in getting a degree, many
mediocre to weak students who now enroll in
college would probably be better off if they
instead partook of some vocational training
and then entered the labor force. A college
education is very beneficial for some students,
but we can’t raise national income by dipping
further into the non-college population and
enticing more of that group to spend time and
money in pursuit of a degree.
Furthermore, it is questionable whether all
the jobs that are now said to require a college
degree in fact require any skills or knowledge
that would presumably be possessed only by
college graduates. Many employers today use
the college degree as a means of screening out
applicants who haven’t continued their formal
education past high school. They do so not
There are quite a few job oppor-
tunities available to high school
graduates that compare favor-
ably in earnings with many of
the jobs where a college degree is
“required.”
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because the work necessarily demands a high
degree of cognitive ability, but rather because
there is such a large pool of applicants with
college credentials that they see no need to
consider people without them.
David Labaree explains why credential
inflation is a problem:
The difficulty posed by (the glut of gradu-
ates) is not that the population becomes
overeducated (such a state is difficult to
imagine) but that it becomes over-creden-
tialed, as people pursue diplomas less for
the knowledge they are thereby acquir-
ing than for the access that the diplomas
themselves provide. The result is a spiral
of credential inflation, for as each level of
education in turn gradually floods with a
crowd of ambitious consumers, individuals
have to keep seeking ever higher levels of
credentials in order to move a step ahead
of the pack. In such a system, nobody
wins. Consumers have to spend increas-
ing amounts of time and money to gain
additional credentials because the swelling
number of credential holders keeps lower-
ing the value of credentials at any given
level … Employers keep raising the entry-
level education requirements for particular
jobs … but they still find that they have to
provide extensive training before employ-
ees can carry out their work productively.
At all levels, this is an enormously wasteful
system …
Credential inflation also explains why
the earnings premium for college graduates
continues to rise: More and more of the job
market is closed off to people who have not
gone to college. It is not that college does so
much to enhance human capital—we have
already seen evidence that it often leaves stu-
dents with weak basic skills—but rather that
credentialism is compressing those who don’t
go to college into a shrinking segment of the
labor market.
hIgher educATIon And
economIc groWTh
Part of the conventional wisdom about
higher education is that by investing in it, a
state can improve its economic performance.
Michigan’s Governor Jennifer Granholm, for
example, says that higher education is like “jet
fuel” for the economy. Is it true, however, that
increased government spending on higher edu-
cation means increasing prosperity for a state
or a nation?
Economist Richard Vedder analyzed state
higher education spending and corresponding
economic performance. He found that there
is actually a negative relationship between
the two. Vedder calculates that a 10 percent
increase in state higher education spending
will reduce economic growth in the state by
5.2 percent. He explains his unexpected result
by noting that much of the money spent in
public universities goes for noneducational
purposes. Vedder writes: “[F]inancing of high-
er education means taking resources away
from the private sector, with its relatively high
and rising productivity subject to the discipline
of market and profit imperatives, and giving
them to the university sector, with its lower
and falling productivity subject to little market
discipline and no profit imperatives.”
International comparisons also support the
conclusion that there is no necessary relation-
ship between the extent of higher education
participation and economic prosperity. Ali-
son Wolf, author of Does Education Matter?,
points out that there are nations that have
invested heavily in education, resulting in
large increases in the percentage of the popu-
lation with college educations, that neverthe-
less have languished economically. At the same
time, there are nations that have very strong
economies where there is little or no effort to
J9
The InsIder Winter 07
20
promote higher education access. She points
to Egypt as an example of a nation in the first
category and to Switzerland of the second.
WhAT To do
The best (and only appropriate) policy
response to the informational aspect of our
overselling problem is to rely upon the free
flow of information. As people learn that
more and more college graduates are wind-
ing up with unskilled employment, the blan-
dishments of college recruiters will become
less persuasive. Furthermore, competitive
institutions offering job training that is more
focused and beneficial than the traditional
college degree have strong incentives to sell
their programs to people who know what
kind of career they want to pursue. A good
example is Northface University in Utah.
With backing from IBM, this for-profit school
provides an intensive 28-month program for
students who want to pursue careers in the
burgeoning field of software development.
The federal government should also stop
subsidizing students to attend colleges and
universities. Economist Gary Wolfram has
advocated that federal student aid programs
be phased out over a period of years. Such a
move would not leave students whose families
cannot afford the expense without financing
options, since there are many loan and schol-
arship programs available on the free market.
Also, a new higher education financing mech-
anism appears to be developing—“human
capital contracts” whereby a student obtains
the money he needs for his education and in
return agrees to repay the investors at a cer-
tain rate for some number of years after enter-
ing the labor market. The great advantage
of philanthropic and market-based financial
aid for education is that it can be targeted to
bright students from poorer families rather
than subsidizing the wealthy and the academi-
cally indifferent.
State governments should increase both
their tuition charges and their entrance stan-
dards. Selective tuition reductions for good
students from poor families is preferable to a
policy that keeps tuition low for everyone.
All states subsidize their higher educa-
tion systems to some degree, although the
degree varies greatly. In some states, tuition
covers less than 25 percent of the cost of the
higher education system, while in some oth-
ers it covers more than two-thirds. There is
no reason why tuition should have to cover
all of the cost of higher education—colleges
and universities have substantial sources of
revenue other than tuition and government
appropriations—but by increasing tuition,
the attractiveness of going to college will
diminish, especially for the most marginal
and disengaged students. Having to pay more
for higher education where the benefit of that
choice is questionable will cause some young
people to pursue other training or job market
options instead.
Equally if not more important, colleges and
universities should increase student entrance
requirements. Higher education is extremely
valuable for some people, but not for everyone.
By promoting it as heavily as we have in this
country, we haven’t raised either the level of
education or skill in the population, but instead
have brought on credential inflation and the
erosion of academic standards. Our best course
is to turn down the sales campaign that has
drawn so many weak students into college.
Dr. Leef is vice president for research for the
John William Pope Center for Higher Edu-
cation Policy. This article is adapted from
his longer paper “The Overselling of Higher
Education,” published September 5, 2006,
by the John William Pope Center for Higher
Education Policy, available at www.johnlocke.
org/acrobat/pope_articles/the_overselling_of_
higher_education_report.pdf.
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L
ast fall, President Bush signed into law
the Federal Funding Accountability and
Transparency Act. This law creates an easy-
to-use Web site that will allow citizens to track
the recipients of all federal funds—“to Google
their tax dollars,” as President Bush memora-
bly put it at the bill-signing ceremony.
Every year the federal government dishes out
nearly 1 trillion of your dollars in contracts,
grants, and earmarks—often with very little
transparency—to various businesses, associa-
tions, and state and local governments.
This new Web site will allow citizens “to go
online, type in the name of any company, asso-
ciation, or state or locality and find out exactly
what grants and contracts they’ve been award-
ed,” President Bush said. “It will allow citizens
to call up the name and location of entities
receiving federal funds, and will provide them
with the purpose of the funding, the amount
of money provided, the agency providing the
funding and other relevant information.”
“Sunshine and accountability are wonder-
ful things in the hands of voters,” The Okla-
homan editorialized September 28, applauding
the bill’s passage. Indeed, as Tommy Vietor, a
spokesman for Sen. Barack Obama (D-Ill.),
observed, “It was a bill that just made so much
intuitive sense that no one could understand
how Congress could not pass it.” And thanks
to an army of bloggers, editorial writers, and
concerned citizens, Congress did pass it.
Now it’s time to take the idea to our state
legislature. Oklahoma taxpayers should be
empowered to Google their state tax dollars.
Many taxpayers are frustrated that the state
budget is now $7.1 billion, an all-time high.
They may be aware that their tax dollars have
paid for things like rooster shows and ghost
employees and $100 car washes, but these
things are just the tip of the iceberg.
The legislature should pass a law requiring
the Office of State Finance to set up a search-
able Web site modeled after the federal version.
Taxpayers deserve to know the name of every
recipient of state dollars, as well as the amount
received in each of the last 10 years and an item-
ized breakdown of each transaction, including
the state agency dispensing the money and a
description of the purpose of the funding.
As conservatives, we favor low taxes, lim-
ited government, and spending limitations.
Many of the people and organizations who
fight for bigger government do so because,
you guessed it, they receive taxpayer dollars.
Those who take the king’s shilling do the
king’s bidding. Taxpayers deserve to know
who they are.
What The Oklahoman said about the fed-
eral funding Web site will also be true of a
state funding Web site: It will be “invaluable
to everyday Americans wanting to know more
about how their tax dollars are being used.”
Dr. Coburn represents Oklahoma in the
United States Senate and is a former trustee
of the Oklahoma Council of Public Affairs.
Mr. Dutcher is vice president for policy of the
Oklahoma Council of Public Affairs. This
article is adapted from Perspective: A Public
Policy Journal from the Oklahoma Council of
Public Affairs, November, 2006.
By Tom Coburn, M.D., and Brandon Dutcher
‘Googling’
state Tax dollars
22
I
t is fair to say that as a nation we do not like
taxes, but we accept them as a necessary
burden to run our country based on the rule
of law. The social contract requires some form
of taxation, but as King George III learned, it
is unwise to be irresponsible when it comes to
tax policy.
The citizen response to taxation is often
complex and confusing. Citizens do not like
high taxes, yet they expect much from all lev-
els of government and complain when defi-
cits grow. How does government keep taxes
low, keep revenues coming in, and yet keep
the economy growing? The solution is to cut
taxes and government spending, in addition to
reviving the fiscal aspects of the Constitution.
The Constitution specifically lists the
responsibilities and powers of the national
government. Article I, Section 8 states the
powers of Congress, and the Tenth Amend-
ment establishes state jurisdiction or Federal-
ism. The Tenth Amendment explicitly limits
the scope of the federal government.
The 20th century saw three important peri-
ods where tax cuts stimulated the economy: the
Harding/Coolidge cuts of the 1920s, the Ken-
nedy cuts of the 1960s, and the Reagan cuts
of the 1980s. All three substantially improved
economic conditions and raised government
revenues during their respective years.
The hArdIng And
coolIdge TAX cuTs
President Warren Harding represented fiscal
conservatism at its best. In 1921 when he took
office, he faced a severe economic recession from
his predecessor President Woodrow Wilson.
Harding, along with Treasury Secretary Andrew
Mellon, resolved the recession by slashing taxes
and government spending. Historian Paul John-
son writes: “Harding and Mellon had done
nothing except cut government expenditure by a
huge 40 percent from Wilson’s peacetime level,
the last time a major industrial power treated a
recession by classic laissez-faire methods, allow-
ing wages to fall to their natural level.”
President Calvin Coolidge, upon the unfor-
tunate death of Harding, continued the tax- and
budget-cut policies of the Harding administra-
tion. “The Coolidge-Mellon team,” says veter-
an political reporter Robert Novak, “took dead
aim at a steeply graduated federal income tax.”
According to historian Robert Sobel, Coolidge’s
“goal was to hold the line on spending, and if
possible roll it back, while at the same time
reducing taxes, for he expected that this would
A Brief Review of the
By John R. Hendrickson
Success of Tax Cuts
Article the twelfth. The power not delegated to the United States by the Constitution,
nor prohibited by it to the States, are reserved to the States respectively, or to the people.
23
Article the twelfth. The power not delegated to the United States by the Constitution,
nor prohibited by it to the States, are reserved to the States respectively, or to the people.
result in greater personal freedom, continued
prosperity, and a more moral population.”
The economic policies of the 1920s created
more revenues and ushered in economic expan-
sion. “Between 1922 and 1929,” writes fiscal
policy scholar Veronique de Rugy, “real gross
national product grew at an annual average
rate of 4.7 percent and the unemployment rate
fell from 6.7 percent to 3.2 percent.” Accord-
ing to columnist Cal Thomas, “[Coolidge] cut
taxes four times and reduced the national debt
by one-third while maintaining a surplus every
year in office.”
The Kennedy TAX cuTs
President John F. Kennedy is not known for
his “conservatism,” but he did understand the
benefit of sound fiscal policy. “Recognizing that
high tax rates were hindering the economy,”
writes tax expert Dan Mitchell, “President
Kennedy proposed across-the-board tax rate
reductions that reduced the top tax rate from
more than 90 percent down to 70 percent.” In
a speech before the New York Economic Club,
Kennedy explained the reason for his policy:
“In short, it is a paradoxical truth that tax rates
are too high today and tax revenues are too low
and the soundest way to raise revenues in the
long run is to cut the rates now.” Walter Heller,
chairman of the Council of Economic Advisors,
described the Kennedy tax cut as a “major fac-
tor that led to our running a $3 billion surplus
by the middle of 1965 before escalation in Viet-
nam struck us.”
The reAgAn TAX cuTs
President Ronald Reagan in 1981 inherited
an economic malaise marked by inflation, high
taxes, and a general feeling that capitalism had
reached its capacity. Reagan understood that
less government and tax cuts were necessary to
reverse the past economic trend. In 1981 Rea-
gan signed into law the Kemp-Roth tax cut,
which slashed income and capital gains tax
rates. “Total federal revenues,” writes Heri-
tage Foundation policy analyst Peter Sperry,
“doubled from just over $517 billion in 1980
to more than $1 trillion in 1990.” Reagan fol-
lowed his tax cut up with another series of
cuts in 1986, which added to the economic
recovery and expansion into the 1990s.
According to Christopher Frenze of the
Joint Economic Committee, “the Reagan
tax cuts, like similar measures enacted in the
1920s and 1960s, showed that reducing exces-
sive tax rates stimulates growth, reduces tax
avoidance, and can increase the amount and
share of tax payments generated by the rich.”
The BenefIT of TAX cuTs
Arthur Laffer, the father of the Laffer Curve
and Supply-Side economics, writes:
Lower tax rates change economic behavior
and stimulate growth, which causes tax
revenues to exceed static estimates. Under
some circumstances, tax cuts can lead to
more—not less—tax revenue. The exact
opposite occurs following tax increases, and
revenues fall short of static projections.
The tax cuts outlined above were signifi-
cant because all three examples ushered in sig-
nificant economic growth. The best economic
policy can be summed up by tax cuts, budget
cuts, and limited government, or to phrase it
in simple terms: constitutional government.
Mr. Hendrickson is a research analyst at the
Public Interest Institute, an Iowa-based non-
partisan public policy research organization.
This article is adapted with permission from
Iowa Economic Scorecard, October 2006,
published by the Public Interest Institute.
The InsIder Winter 07
24
What the Government
Giveth,
the Government
Taketh Away
By Peter Saunders
In the 20th century, the growth of the state was a
worldwide phenomenon. Now in the 21st century, hav-
ing second thoughts is a worldwide phenomenon, too.
Following is a report from Australia. —Ed.
Welfare
State
Mindset
25
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T
he welfare state developed to support
people who could not afford to look after
themselves: old-age pensions for elderly people
with no savings; help for widows; child pay-
ments for families; allowances for unemployed
people who couldn’t find jobs; financial help
with health costs for those who fall sick.
But Australia is now a much richer country
than it was when these pay-
ments and services were first
introduced. Economic growth
has more than doubled liv-
ing standards in the last 40
years (indeed, real incomes
have risen 25 percent just in
the last 10 years). Rates of
growth this high have deliv-
ered a level of affluence that
our grandparents could only have dreamed
about. We buy houses that are bigger and bet-
ter equipped than ever. We run cars. We take
exotic holidays, and we think nothing of tele-
phoning the other side of the world or flying
to the other side of the continent.
This increased affluence should mean that
most of us can afford to cover the basic neces-
sities of life that our grandparents struggled
to attain—things like private health insurance,
personal unemployment savings or a retire-
ment annuity. But here’s the puzzle:
Given that the welfare state came into exis-
tence to provide necessities for those who
couldn’t afford them, and since we are all
much better off now than we were a couple of
generations back, why is the welfare state still
getting bigger? If more people are in a posi-
tion to look after themselves than ever before,
shouldn’t the welfare state be shrinking?
In recent decades, the welfare state has
become one of Australia’s biggest growth
industries. For example, 40 years ago, just one
working-age adult in 30 lived on welfare ben-
efits. Today it is one in six. But the extraordi-
nary expansion doesn’t end there. Nowadays,
it seems almost everybody relies on govern-
ment hand-outs in one form or another. If it
isn’t middle class parents enjoying subsidised
school fees, it’s affluent patients claiming
Medicare rebates or young professionals get-
ting taxpayers to share their child care costs.
Even the wives of millionaires now claim fam-
ily payments. We have become a nation of
supplicants.
It didn’t used to be like
this. For most of our his-
tory, ordi nary peopl e
looked after themselves
and cared for their families
from their own resources.
If they needed help they
turned to their families,
churches, and charities, or
they banded together in friendly societies and
trade unions to create mutual aid societies. But
most of the time they expected to look after
themselves and their families without seeking
financial support from others. The norm was
family self-reliance, and people were proud of
their independence.
Over the last 40 or 50 years, as government
spending has spiraled upwards, we have lost
this spirit of self-reliance. We have learned
instead to rely on politicians to give us the
things we used to organise for ourselves. Our
first instinct nowadays whenever we become
aware of a problem is not to solve it ourselves,
but to demand that the government do some-
thing about it.
The federal government has come to be seen
by many people as a giant cash machine whose
principal purpose is to spray money at them.
We see this at federal budget time, when we
ask what handouts the Treasurer has given us,
and we see it during elections, when politicians
compete for our votes by promising this or that
group more goodies. Our democracy has come
to look less like the Athenian polis and more
like a bunch of spoiled children squabbling
Our first instinct nowadays
whenever we become aware of a
problem is not to solve it ourselves,
but to demand that the government
do something about it.
The InsIder Winter 07

over their presents on Christ-
mas Day morning.
Of course, the govern-
ment has no money of its
own to dispense. Every dol-
lar that Prime Minister How-
ard directs at one section of
the population, Treasurer
Peter Costello has to take
from another. As demands
and expectations escalate,
this means governments rob
Peter to pay Paul, and then
mug Paul to compensate
Peter. The net result is that
many of us end up no better off than we would
have been had the government simply left us
alone. What we receive in benefits, subsidies
and services we lose in higher taxes. Everybody
is paying for everybody else’s handouts.
This is why the welfare state keeps getting
bigger, even though the need for it is declining.
We have developed a “welfare state mindset”
that assumes any problem and any need has to
be resolved by government. We therefore keep
demanding that government do more for us,
and politicians respond by taking even more
taxes out of one pocket in order to stuff the
money back into another.
There are few winners from this continuous
expansion of government other than politi-
cians and bureaucrats. High welfare spending
(and the high taxes that go with it) empowers
them, for it puts our cash in their hands. But
almost everyone else loses.
When we hand money to the government,
we relinquish our ability to make our own
decisions and choices about how it should be
spent. We allow career politicians and bureau-
crats to decide what schools our children
should attend, what sort of retirement pen-
sion we should have, what
kind of health treatment we
should get. Like children, we
are rendered dependent on a
higher authority to determine
many of the most important
decisions affecting our lives.
Yet we actually need the
government less today than
ever before. Most of us
today could afford to buy
income insurance, health
insurance, and a retirement
pension—if only we didn’t
have to give so much of our
income to the government in taxes.
So we are trapped in a vicious circle. Because
we give so much of our cash to the government,
we don’t have enough left to buy the services
we need, and because we don’t have enough
left to buy these services, the government keeps
raising taxes to provide them for us.
To break out of this circle, government must
leave more of the money we earn in our own
pockets. That way we can provide for ourselves
rather than relying on politicians to look after
us. Earlier generations (who lived in a world
incomparably less affluent than our own) were
perfectly capable of running their own lives
with little support from the state. Given our
level of affluence, we should at least be able to
emulate their example. It is time to take back
responsibility for running our own lives.
Mr. Saunders is Social Research Director
of The Centre for Independent Studies and
author of Australia’s Welfare Habit and How
to Kick It. This article is a transcript from
“Counterpoint,” a program of the Australian
Broadcasting Corporation’s Radio National,
November 27, 2006.
The federal government has
come to be seen by many people
as a giant cash machine whose
principal purpose is to spray
money at them.
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27
Bloggers
Leave Their
Mark on
Capitol Hill
By Robert B. Bluey
I
n ways both big and small, bloggers are chang-
ing how business is done on Capitol Hill.
Senate Majority Leader Harry Reid of
Nevada learned firsthand the effect bloggers
can have on public policy when he was hand-
ed a defeat only days after Democrats took
control of the 110th Congress.
In the weeks that followed, bloggers dem-
onstrated they weren’t going away. No mat-
ter what the issue—from the minimum wage
to the war in Iraq—bloggers made sure they
were part of the debate, demonstrating that
anyone with a blog can have an impact on
public policy.
Bloggers began having an impact on Capi-
tol Hill long before the 110th Congress, but
with conservatives relegated to the minority in
the House and Senate, right-leaning bloggers
have ratcheted up their focus on Congress.
It all started in early January when con-
servative Sen. Jim DeMint of South Carolina
sought to strengthen the Senate’s ethics reform
bill by amending it to include the same ear-
mark reform language in the House-passed
version supported by Speaker Nancy Pelosi of
California. Reid’s deputy, Majority Whip Dick
Durbin of Illinois, tried to kill the amendment,
but nine Democrats broke ranks and backed
DeMint. Instead of accepting defeat, Reid
tried to twist arms and reverse the vote.
That’s when bloggers took notice. Following
the lead of The Heritage Foundation’s Bridgett
Wagner, who notified bloggers via e-mail, a
coalition of bloggers known as “Porkbusters”
documented Reid’s strong-arm tactics. Andy
Roth at the Club for Growth and Ed Frank at
Americans for Prosperity jumped on the story,
alerting supporters on their blogs. Mean-
while, I posted video on YouTube of Reid and
DeMint’s clash on the Senate floor.
Other bloggers sent e-mails to Jon Henke,
the newly hired new-media director for Senate
Minority Leader Mitch McConnell of Ken-
tucky. It’s Henke’s job to deal with bloggers,
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and if there was ever an occasion, this was it.
Despite McConnell’s support for DeMint’s
amendment, an Associated Press story report-
ed otherwise, and Reid implied as much on the
Senate floor.
McConnell’s staff got the message—and
set out to correct the record. Henke e-mailed
bloggers, “Sen. McConnell is supporting Sen.
DeMint and doing everything we can to make
sure that the Democrats don’t destroy earmark
reform.” By the next day, Henke was playing
offense instead of defense, keeping bloggers
appraised of the latest developments.
The debate had captivated the blogosphere.
As Roth noted at the Club for Growth, more
than 1,700 blogs had been written about ear-
mark reform over a 24-hour period.
Three of the most well-trafficked liberal
blogs—Daily Kos, MyDD and TPMmuck-
raker—also turned on the Democratic leader.
“Sen. Harry Reid is fast losing whatever cred-
ibility he had on earmark reform,” wrote a
blogger at Daily Kos. “Who’s the arm-twister
now?” asked Paul Kiel at TPMmuckraker.
Just one day later, Reid reversed course and
DeMint was lauding him for agreeing to lan-
guage that was “even stronger than what I had
originally proposed.”
Last fall, it was through a similar effort that
two freshmen senators—liberal Barack Obama
of Illinois and conservative Tom Coburn of
Oklahoma—overcame hurdles to pass legis-
lation improving government transparency
on contracts and grants by putting most fed-
eral spending on the Internet in a Google-like,
searchable database.
A group of conservative and liberal blog-
gers, most of whom had never met each other,
rallied around the legislation, propelling it
from oblivion to President George W. Bush’s
desk. And the White House, recognizing the
significance of the moment, invited a dozen
bloggers to the bill signing.
The difference between then and now is that
two U.S. senators—McConnell and DeMint—
now employ seasoned bloggers. As important
a role as Henke played in the minority leader’s
office, so too did Tim Chapman in DeMint’s.
Chapman, who previously worked with blog-
gers while at The Heritage Foundation, knew
how to get the message out.
Chapman and I began building the founda-
tion for blogger activism last May when we
co-founded a weekly meeting for conservative
bloggers. Sponsored by Heritage and Human
Events, the meeting brings together some of
the nation’s top bloggers—from RedState’s
Erick Erickson to Townhall’s Mary Katha-
rine Ham—to share and discuss policy issues
on Capitol Hill. More than a dozen members
of Congress have addressed the group, and
even the White House sent a representative to
address the group in January. Each meeting
offers an active discussion of how conserva-
tive bloggers can work together.
According to a recent study conducted by
T. Neil Sroka, a student at George Washing-
ton University, upward of 90 percent of Capi-
tol Hill offices pay attention to blogs, and 64
percent of congressional staffers say blogs are
more useful than mainstream media for gaug-
ing political problems. Two of the most popular
blogs—Daily Kos on the left and RedState on
the right—welcome any user to post, meaning
you could be changing minds almost instantly.
That’s what’s great about blogging—no
matter what you care about, chances are you
can build a coalition. And with tools like Tech-
norati, an Internet site that tracks 63.2 million
blogs, and Google Blog Search, it’s never been
easier to find people with common interests.
As the episode with Reid illustrates, bloggers
can pack a punch and—with allies in the halls of
Congress—they really can make a difference.
Mr. Bluey is director of the Center for Media
and Public Policy at The Heritage Foundation.
He blogs at RobertBluey.com.
Visit Insideronline.org
Visit Insideronline.org
29
F
or many years, advocates of the free mar-
ket have argued that we need to “be” the
media in our efforts to disseminate messages
that might not otherwise make it through the
editorial process.
The rapid rise of the Internet—the Web,
e-mail, blogs, newsgroups—have given us
tools to connect with allies across the globe in
ways never imagined. Podcasting is another
such tool.
What is a podcast? Put simply, it is an Inter-
net-based audio program that can be easily
downloaded to a computer, iPod (hence the
name) or other portable music player. Podcasts
can be thought of as running on the same tech-
nology that gives us blogs and other user-sub-
scriber Web tools. The clearest advantage to a
podcast is that once someone subscribes, your
daily or weekly program is automatically deliv-
ered to their computer without them having to
check for an e-mail or visit your Web site.
For most of us, the primary purpose of a
podcast should be to offer existing informa-
tion in a format that is more readily acces-
sible, or easier, for our audience. One should
not try to think of it as creating a new infor-
mation program, or even as an in-house radio
show. Instead, think of it as an audio version
of our latest research, commentaries, or other
communication outreach efforts.
Such an activity allows us to maximize our
existing efforts in a convenient format for both
primary and secondary audiences.
Like most communications tools, podcasts
must be offered on a regular basis. Irregularity
makes it extremely difficult for users to know
when something new is available. If they check
back once or twice and nothing new is posted,
they are likely to forget about checking back
again. Setting a regular update schedule and
sticking with it is critical.
By podcasting speeches, interviews, reports,
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Speaking In
Your Own Voice
how Podcasting Can help You
Get Your Message out
By Michael Quinn Sullivan
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Hardware Needs
Mixing board: EuroRack UB502. ($30)
Two microphones and a splitter (leading into the mixer). It is important to get
decent quality microphones. Radio Shack specials will not give the same quality
as a Sure microphone or an EV. ($100 – $200)
“InPort” USB audio connection. This takes the RCA-style output from the mixer into
your computer’s USB port. ($30)
Any modern laptop computer (hopefully already part of your budget).
Optional hardware.
Olympus DS-330 digital recorder (allows you to record to a separate device from
your laptop and well worth the cost).
Software Needs
WavePad (www.nch.com.au/wavepad/masters.html). A superior “audio capture” pro-
gram for recording purposes. A free version exists, but the master costs only $50.
This software allows for easy graphical editing of sound files, pasting in corrections,
etc. It can also remove annoying clicks and pops that tend to plague audio record-
ings, as well as reduce distracting “white noise” background sounds (like the con-
stant hum of an air conditioning unit).
Propaganda (www.makepropaganda.com). The software bills itself as a way to seam-
lessly record and post podcasts. It doesn’t entirely deliver on that, but for the money
the program does an excellent job of turning wav-format files created with WavePad
(or any other sound file) into a solid mp3. You can mix channels of audio for back-
ground music, introductions, exits, and other cues. Propaganda allows you easily to
implement fades and other fancy audio stuff. Cost: $50.
WS-FTP (www.ipswitch.com). I use this free file transfer program to upload my files
(XML and MP3) to the Web server. FileZilla is another free option.









Getting Started …
Pre-Production
• How often will we issue our podcast? And can we commit to it through thick and thin?
• Will we use background music to begin and end the podcast?
• How will we promote the podcast?
Production
• What are the four most important questions I can ask about this issue?
• Can my guest get to the point quickly?
• Am I recording in a place with minimal background noises?
Post-Production
• Who needs to get an early release of this (reporters, lawmakers, etc.)?
• Where on the Web site will we highlight this edition?
Questions to Consider …
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3J
short lectures and other forms of intellectual
exchange, think tank managers enable legis-
lative staffers, and anyone else interested in
important public policy discussions, to down-
load and listen to great ideas at their leisure.
Podcasting allows individuals to expose
themselves to great ideas as they go about
their daily lives, often as they continue work-
ing uninterrupted on other projects.
For many of us, our core audience is policy-
makers and their staffs. While it might be nice
to think they sit eagerly in their office await-
ing the next 80-page study, complete with
regression analysis tables and appendices upon
appendices, they in fact are doing other things.
It is in that realm of “other things” that pod-
casting allows us to disseminate our message.
It’s important, though, not to confuse pod-
casting efforts with real journalism. Just as we
don’t pretend our newsletters are the one-news-
source for our readers, so too should we treat
our podcast somewhat realistically. We’re not
trying to recreate a radio show or newsmaga-
zine, we’re trying to propagate our ideas.
A daily or weekly podcast—set on a definite
release schedule—can serve as background
accompaniment to the stuffing of envelopes, a
morning job or the evening commute.
It is important not to let our podcasts
become the audio version of a thick economic
text. The content should be engaging, pref-
erably in an “interview” format—giving the
listener a voice with which to identify as the
learner/questioner. The podcast should be
kept to a manageable length—no more than
15 minutes.
As with all communications efforts, pod-
casts should be in line with the other things you
are doing that week. Don’t have a commentary,
press release and study coming out about the
minimum wage, and use your podcast to extol
the benefits of a new trade proposal!
And as with other forms of communica-
tion, know who you’re trying to reach with
your podcast. It’s rather doubtful your largest
donors are also going to be your primary pod-
cast audience. The most consistent, immedi-
ate listeners will be young elected officials and
their young staff—along with news reporters,
talk-show producers and possibly lobbyists.
As a side note, radio reporters are no less
lazy than their print counterparts. Just as the
text from a press release helps a print reporter
fill space in a story, so too does a quick, exist-
ing actuality from a podcast help the radio
journalist.
The tools for producing a quality podcast
can be had for a very small investment—less
than $500—and your existing Internet hosting
provider should be able to support podcasting
without any hiccups. It is important to check
your contract to understand what your band-
width charges might be; a popular weekly
podcast of modest size could greatly increase
your monthly Web hosting fees if you are not
careful and do not plan ahead.
Perhaps more than any other form of
electronic communication to date, podcast-
ing allows us to speak, literally, in our own
voices to those we are seeking to influence
and educate.
Mr. Sullivan is president of Texans for Fiscal
Responsibility. He started the successful,
weekly “Texas PolicyCast” at the Texas Public
Policy Foundation.
The tools for producing a quality podcast
can be had for a very small investment.
214 Massachusetts Avenue, NE
Washington, DC 20002
(202) 546-4400 • heritage.org
E
ver wonder what you could get done with
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thinkers have answers. Find them here.
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